In my last market update written on March 23rd titled“Market Very Nervous” I had mentioned that even though market is going up S&P could come down to 1815 after hitting 1900. S&P came to 1897 and then reversed its course and hit 1815 on Friday April 11th.
Now market is at critical stage. It has to decide what step it will take next. There is nothing concrete written on the stone. Traders need to evaluate possible scenarios and then trade accordingly.
One scenario is that S&P could find support right at this level of 1815 or S&P E-Mini (E-Mini closed at 1811.75 on Friday) could dip to 1797 and then by late Mondayafternoon or Tuesday morning stabilize and starts to rise.
We could even see some buying on Wednesday andThursday. On Friday market is closed for holiday. ByThursday close S&P could rise to 1843-1845, max 1847 and then starting Monday (April 21st) we could see another sell off and this sell off could continue till April end and finish at 1750 level.
Another possible scenario is that S&P continues to rise upward after bottoming on Tuesday. First clue will come when S&P closes above 1848 level. Second confirmation will come when S&P closes above 1860.
In summary, market is at critical stage and shorting the market or buying Puts in the stocks have to be very selective.
As we know NASDAQ is the lead the market to the downside. When looking at NASDAQ 100, it looks like that it could have bottomed on April 11th when it hit the low of 3440.55.
Market has become very choppy, nervous and difficult to trade. It is testing the skills of traders. Traders need to evaluate the market thoroughly every weekend to determine the possible scenarios for next five days. I try not to use the “ifs” and “buts” scenarios to make me look good at the end, just because I mentioned half a dozen scenarios and one of them comes out to be right. That is no technical analysis. That is caveman doing his market analysis sitting in his cave and then beating his chest when one of the scenarios is right.S&P facing tremendous resistance at 1890 level although it has not reached there yet. On Friday, March 21st S&P went to 1884 and reversed to downside and closed at 1866.52. So logically S&P has to try again to conquer 1875 and then 1884 and then if it closes above 1890 then will head towards 1935. Otherwise it is expected to come down to 1810-1815 level.Dow Jones has yet to conquer December 31st, 2013 high of 16,588, whereas S&P made new high on Friday. Whenever market does this kind of action, it shows that market is nervous and traders do not know what to make of it. So there is clear divergences going on.
Markets also have tendency to rally starting end of March and continue to do so till end of April and then laziness sets in where there is not enough buying and selling going on and then on any negative news creates sell off.
However, it also seems that since S&P is facing tremendous resistance at 1875-1890 level so the sell off could occur anytime and thus bringing S&P down to 1810-1815 level and then rebound to the upside occur which continues till end of April. What will happen next will be known to us in near future.
For now 1855 and 1839 needs to be watched to the downside. Break of 1839 will bring S&P to 1810. If however, S&P takes out the high of 1884 made on Friday(March 21st) then 1935 is the possibility. But we must keep in mind that even if it breaks 1884 to the upside S&P can still fail at 1890 level and come down.
I hope the above helps you in putting on profitable trades this week.