The market is doing what it is supposed to do so far. Let’s keep going. At first glance, the daily S&P 500 (SPX) is poised to break the 3773.30 TDST Support level as the current selloff appears to be gaining some momentum to the downside with an active TD Buy Setup @2.
However, the daily Nasdaq ETF (QQQ) is nearing price exhaustion with a TD Buy Setup @7. One more lower low will ‘perfect’ the first half of TD Sequential. A downward flush either Monday or Tuesday should clean out the sellers and provide at least a temporary bottom. Since the majority of companies are tech based, this should stabilize the SPX as well. If there is no upside momentum that can at least push the SPX above 3830.11 which was the former two hour SPX TDST Support. It is likely buyers are absent, and selling will continue.
Since the relationship between the SPX dividend yield and the 10 year Treasuries are in the spotlight, the representative index, the CBOE 10 year Treasury index has hit an extreme on the daily chart with a TD Sell Setup @9 at an index high of 16.14 (or 1.614%) last Thursday and the weekly chart has a ‘perfected’ TD Sell Setup @8. This indicates the 10 year Treasuries should stabilize around this area of 1.50% which should stabilize the equity markets. In order to support the rising rates going forward, economic indicators need to start showing growth. If the economy lags with rising rates, that portends to more selling in stocks.
With interest rates and commodity prices on the rise, investment firm asset allocation models will shift and provide different leaders and laggards. Expect the SPX on a weekly basis to continue to consolidate during this adjustment period.
The monthly SPX recorded a TD Sell Setup @9. It won’t be unusual for the monthly chart show a one wobbly red candle, but continue to head higher given the massive liquidity from central banks. Thus the base case is the bull market should continue. However, the TD Sell Sell Setup @9 should not be discarded. Although it is not the base case, the big surprise would see the high already put in at 3950.43. That’s how markets end — with a surprise.
Bitcoin (BTC) is now trading under the 6 and 8 hour TDST Support levels at 47,832.49 and 47,051.22. A daily close below these levels should allow the short term 6 and 8 hour timeframes to record TD Buy Setups @9. If these short term timeframes do not show enough buying to push above their respective TDST Support levels, more price damage is likely.