The Bottom Line:
- Resistance levels in the S&P 500 futures and SPY are being closely watched, with a clear line in the sand at the high of Thursday.
- Potential daily bear flags are being monitored in the NASDAQ, SMH, and other sectors, with the FOMC announcement on Wednesday expected to have a significant impact.
- The relationship between the NASDAQ, IWM, and the dollar is being closely observed, as the dollar’s inverse head and shoulders pattern is confirmed.
- Crypto stocks and Bitcoin are showing signs of weakness, with potential daily head and shoulders patterns and bearish engulfing candles.
- Silver and gold are being monitored for potential monthly higher lows, while oil is experiencing significant weekly consolidation and volatility.
Closely Monitoring S&P 500 Futures and SPY Resistance Levels
Analyzing Key Resistance Levels in S&P 500 and SPY
The S&P 500 futures chart shows a break above Friday’s high, nearly double-topping at Thursday’s high. However, SPY failed to break Friday’s high by just 14 cents, presenting a slightly different picture. SPY is currently on its second consecutive day of inside bars, indicating increased volatility is likely tomorrow, especially with the upcoming FOMC meeting on Wednesday. The clear resistance level to watch is Thursday’s high, which has been rejected multiple times. If this level is not convincingly broken, it suggests a potential bear flag pattern.
Monitoring Potential Bear Flags in NASDAQ and SMH
The NASDAQ is facing a similar situation, with the highs of Thursday and the past few days acting as clear resistance. If this level is not broken convincingly, it could indicate a bear flag pattern. The only way for bulls to negate the bear flag is by breaking the resistance and turning it into support. SMH, which was weaker than the NASDAQ today, is also showing signs of a potential daily bear flag. If another leg down occurs, it could lead to daily oversold conditions, presenting an opportunity for monthly higher lows.
Observing Sector-Specific Movements and Dollar Correlation
The healthcare sector is hovering just below all-time highs, with a second consecutive daily inside bar. A break is expected in the near term, with the burden on bears to prove otherwise. The financial sector (XLF) also formed a daily inside bar, and bulls must hold $42.58 for a daily higher low to attempt a move back towards the all-time high. The small-cap Russell 2000 (IWM) double-topped at Friday’s high and set a new low of the day, acting as a lead bear sector. The strengthening inverse correlation between IWM, metals, and Bitcoin against the dollar has been evident since the CPI reaction in mid-June. As the dollar confirmed a daily inverse head and shoulders pattern today, these assets experienced significant drops.
Potential Daily Bear Flags in NASDAQ, SMH, and Other Sectors
Analyzing Key Resistance Levels in S&P 500 and SPY
The S&P 500 futures chart shows a break above Friday’s high, nearly double-topping at Thursday’s high. However, SPY failed to break Friday’s high by just 14 cents, presenting a slightly different picture. SPY is currently on its second consecutive day of inside bars, indicating increased volatility is likely tomorrow, especially with the upcoming FOMC meeting on Wednesday. The clear resistance level to watch is Thursday’s high, which has been rejected multiple times. If this level is not convincingly broken, it suggests a potential bear flag pattern.
Monitoring Potential Bear Flags in NASDAQ and SMH
The NASDAQ is facing a similar situation, with the highs of Thursday and the past few days acting as clear resistance. If this level is not broken convincingly, it could indicate a bear flag pattern. The only way for bulls to negate the bear flag is by breaking the resistance and turning it into support. SMH, which was weaker than the NASDAQ today, is also showing signs of a potential daily bear flag. If another leg down occurs, it could lead to daily oversold conditions, presenting an opportunity for monthly higher lows.
Observing Sector-Specific Movements and Dollar Correlation
The healthcare sector is hovering just below all-time highs, with a second consecutive daily inside bar. A break is expected in the near term, with the burden on bears to prove otherwise. The financial sector (XLF) also formed a daily inside bar, and bulls must hold $42.58 for a daily higher low to attempt a move back towards the all-time high. The small-cap Russell 2000 (IWM) double-topped at Friday’s high and set a new low of the day, acting as a lead bear sector. The strengthening inverse correlation between IWM, metals, and Bitcoin against the dollar has been evident since the CPI reaction in mid-June. As the dollar confirmed a daily inverse head and shoulders pattern today, these assets experienced significant drops.
Relationship Between NASDAQ, IWM, and the Dollar’s Inverse Head and Shoulders Pattern
Strengthening Inverse Correlation Between IWM, Metals, and Bitcoin Against the Dollar
The small-cap Russell 2000 (IWM) has shown a clear strengthening of its inverse relationship with the dollar since the CPI reaction in mid-June. This inverse correlation also extends to metals and Bitcoin, which have been grouped together with IWM. As the dollar confirmed a daily inverse head and shoulders pattern today, IWM, metals, and Bitcoin experienced significant drops, further highlighting this inverse relationship. The strengthening of this correlation will be closely monitored, as it can have a significant impact on the movements of these assets.
Crypto Stocks as Lead Bears and Their Relationship with Bitcoin
Crypto stocks, such as Coinbase (COIN), Marathon Digital Holdings (MARA), and CleanSpark (CLSK), acted as lead bears today. With Bitcoin and IWM dropping together, the downward move in these crypto stocks was magnified. COIN is showing a potential daily head and shoulders pattern, with earnings later this week. Bears will be looking to confirm this pattern. MARA is setting daily lower highs, with a possible bearish engulfing candle and bear flag. If Bitcoin begins weekly consolidation, which is a possibility given the potential daily rising wedge, these crypto stocks may head down to their weekly supports, as they are not as well-positioned as Bitcoin and are closer to their support levels.
Dollar’s Inverse Head and Shoulders Confirmation and Its Impact on Metals
The dollar’s confirmation of a daily inverse head and shoulders pattern has had a notable impact on metals. Silver experienced a daily bear flag confirmation today, although there was a nice buy of the dip without follow-through. The clear resistance level in silver must be broken for bulls to make any progress. If a monthly higher low is to be shaped in silver, it may come from daily oversold conditions, similar to what was observed in big tech and semiconductor stocks months ago. Gold, on the other hand, is holding up better than silver, with a potential 12-hour trend change trying to shape up. However, a possible weekly rising wedge pattern in gold is being monitored, and its future direction will largely depend on the dollar’s movements.
Crypto Stocks and Bitcoin Showing Signs of Weakness
Bitcoin and Crypto Stocks Showing Weakness Amid Potential Bear Flags
Crypto stocks, such as COIN, MARA, and CLSK, were among the lead bears today, with gap-up opens followed by bearish engulfing candles. The combination of Bitcoin and IWM dropping together magnified the downward move in these stocks. COIN is displaying a potential daily head and shoulders pattern, with earnings later this week that could confirm the pattern. MARA is setting daily lower highs, with a possible bearish engulfing candle and bear flag formation. If Bitcoin begins weekly consolidation, which is a possibility given the potential daily rising wedge, these crypto stocks may head down to their weekly supports, as they are not as well-positioned as Bitcoin and are closer to their support levels.
Dollar’s Inverse Head and Shoulders Confirmation Impacting Metals and Commodities
The dollar’s confirmation of a daily inverse head and shoulders pattern has had a notable impact on metals and commodities. Silver experienced a daily bear flag confirmation today, although there was a nice buy of the dip without follow-through. The clear resistance level in silver must be broken for bulls to make any progress. If a monthly higher low is to be shaped in silver, it may come from daily oversold conditions, similar to what was observed in big tech and semiconductor stocks months ago. Gold, on the other hand, is holding up better than silver, with a potential 12-hour trend change trying to shape up. However, a possible weekly rising wedge pattern in gold is being monitored, and its future direction will largely depend on the dollar’s movements. Oil, which has seen a significant retracement of its recent gains due to a lack of established supports on the way up, is now creating an equilibrium pattern on the weekly chart. Volatility in oil is expected to increase in Q3 2024.
Monitoring the Impact of FOMC Meeting and Earnings on Market Movements
As the market awaits the FOMC meeting on Wednesday, which is expected to have a significant impact, the focus remains on the clear resistance levels that will determine whether the potential bear flags in various sectors and assets will be confirmed or negated. Additionally, big earnings reports from companies like Apple, Microsoft, Amazon, Meta, and AMD will likely lead to notable reactions in the market. The tight range in SPY, which is currently on its second consecutive day of inside bars, suggests that increased volatility is likely in the near term, especially with the upcoming FOMC meeting. The market’s reaction to the FOMC decision and the subsequent earnings reports will play a crucial role in determining the direction of the various sectors and assets in the coming days and weeks.
Monitoring Silver, Gold, and Oil for Potential Trends
Oil Experiencing Significant Retracement and Volatility Expectations
Oil has seen a significant retracement of its recent gains, with a 50% or greater pullback on weekly consolidation. This is largely due to the lack of established supports during the previous upward move, making it easier for the price to retrace a substantial portion of the gains. The current weekly chart is creating an equilibrium pattern, and volatility in oil is expected to increase in Q3 2024. The market will be watching for a weekly higher low to form, but the tightening price action suggests that a break is likely to occur eventually.
Natural Gas Remains Bearish with No Signs of Trend Change
Natural gas continues to exhibit a strongly bearish trend, with weekly stair-step drops over the past couple of months and fresh lows being set. The daily chart remains in a downtrend, and there are no signs of a potential trend change at the moment. As long as a weekly uptrend is not confirmed, the bearish outlook for natural gas persists. This asset is not currently a focus for the author, as the bearish trend appears to be firmly entrenched.
FOMC Meeting and Earnings to Drive Market Direction
The upcoming FOMC meeting on Wednesday is expected to have a significant impact on the market, with investors closely watching for any potential changes in monetary policy or forward guidance. The market’s reaction to the FOMC decision will likely play a crucial role in determining whether the potential bear flags in various sectors and assets will be confirmed or negated. Additionally, the release of big earnings reports from companies such as Apple, Microsoft, Amazon, Meta, and AMD will provide further catalysts for market movements. The tight range in SPY, which is currently on its second consecutive day of inside bars, suggests that increased volatility is likely in the near term, especially with the confluence of the FOMC meeting and earnings reports.
