Big Tech Earnings Save the Day - Trading Week Update

There was a powerful movement today, in all the important indexes fueled by the Megacap Tech companies. Meta Platforms (FB) closed with amazing gains of +17%, the chip companies also had a powerful rally, like Nvidia (NVDA) +7%. My take on this movement is that it still looks like a reaction rally from oversold conditions (-3 Keltner Channel). If we want to see something interesting, it would have to be when the index really breaks important resistance or support levels.

In yesterday's article, I explained the likelihood of a reaction rally, which has happened in the past when the index has declined to the current price levels (green arrows). It won't necessarily mean that the Market direction is changing, those same recent reaction rallies, a couple of them were killed pretty quickly. For example, the Feb/24 rally only lasted two days before stalling and declining again.

A very important resistance level that is proving hard to reach/break for the S&P 500 is the level of 4,600 (orange arrows). That's a point where the selling pressure increases dramatically and the index goes down. There is only one trading day left this week, even if there is another powerful rally I won't think about opening new long positions until the S&P 500 closes decisively above 4,500. I don't day-trade or swing trade anymore, so the current volatility is of no interest to me. I need a strong uptrend in order to profit from it.

S&P 500, daily chart, you can click on the image in order to magnify it

If this powerful movement that we saw today is really going to become a real multi-day rally, tomorrow we should see the New Highs and New Lows numbers improve at least on the Monthly timeframe (columns G, H, I). There were more than 2,000 stocks making New Monthly Lows today, that's still a lot of companies.

Unless your strategy is based on volatility or trying to pick a bottom (which is highly risky), this is a time where the Correction can still resume. It's a time where strict risk management can prevent a deadly blow to an account. I'm mostly in cash so even if the Correction resumes the hit will be minimal.