Welcome back, everyone.
I hope you all had a great week, both in and out of the markets. Last week brought the S&P right back down to the key Value Area Low (VAL), which has now held twice and prevented us from pushing lower. This level sits at 6613 and marked the low during the overnight session on Sunday.
Before diving into the levels for the week, we will look at the economic calendar and then the overall trend for both the S&P and Nasdaq.
Economic Calendar
Monday: None.
Tuesday: None.
Wednesday: Interest Rate Decision.
Thursday: None.
Friday: None.
Overall, all eyes are on the Fed this week regarding their expectations for the conflict with Iran. They will likely remain cautious, pointing to the rise in oil prices that could trigger a sharp increase in inflation. Whether this is a prolonged or temporary issue will likely depend on the President. Interest rates are expected to remain unchanged, a trend that will likely continue for most of the year. Little weight will be put into these upcoming meetings, as the Fed may wait for more clarity from the administration. It is a difficult environment to navigate, as Trump pushes for lower rates while the economic data provides justification to keep them elevated.
SPY & QQQ Trends
SPY
Price has now seen a weekly close below both the 10-week EMA and the 21-week EMA. These indicators are on the brink of a bearish crossover, which could trigger steeper selling. The 21-week EMA at 674.90 will be a key resistance level this week and represents one of the most attractive levels to initiate shorts. Whenever we see a weekly close below the 21-week EMA, it is likely that new lows will be hit in the coming weeks. We will pay close attention to this average as long as price remains below it.
QQQ
The Nasdaq has posted its second consecutive weekly close below the 21-week EMA. This setup is now identical to the S&P, which is a notable shift since the initial selling was led primarily by software stocks. A broader sell-off developed once the conflict began. For now, we are using the 21-week EMA at 604.46 as key resistance. Closes below this level will continue to put pressure on the markets and lead to further selling toward new swing lows.
Both indexes remain in “sell the rally” territory, even as the President suggests otherwise. We continue to hear that this sell-off will be short-lived, but current data says otherwise. Ultimately, the priority is whether we can get a weekly close back above the 21-week EMA on both the S&P and Nasdaq; everything else is secondary.
