The Stock Market May Have Made A Pivotal Turn

Subscribe to The Free Market Chronicle and join the 2,679 subscribers getting it for FREE!

8/22/24

#MACRO: $NDX, $SPX, $SMH, $USDCAD

#STOCKS: $NVDA

Check out My Reading The Market’s Macro Subscription Service For More Content Daily, Get 35% Off The 1st Year:

Stocks were lower today, with the S&P 500 dropping 89 basis points. The decline could have been slightly worse without a 19 basis point gain on a one-minute candle at 3:59 PM.

I was somewhat surprised by today’s market on close (MOC) orders. Not only were they for sale, but they were also relatively small, totalling less than $1 billion. Typically, when there’s a considerable amount to buy or sell at the close, it signals activity from systematic funds, especially when it happens consistently day after day. However, today marked the first time the MOC was pretty small, which makes me wonder if today’s downward move may have triggered a change among those systematic funds

Volume was higher today on the S&P 500 futures, and it also appears that the futures broke an upward-sloping channel. It seems the market finds it easy to rally when there’s low volume, but as soon as that volume starts to tick higher, the rally stops. This suggests there may be more of an absence of sellers in the marketplace than buyers rushing in.

The break of the upward-sloping channel is also noteworthy because it resembles a flag pattern with an upward-sloping channel. These patterns often break lower, which is precisely what happened here.

Additionally, the VIX jumped today, likely in anticipation of Powell’s speech tomorrow, which sets up the potential for a volatility crush once he begins speaking. The critical difference between Powell’s appearance at Jackson Hole and an FOMC meeting is the timing—Jackson Hole takes place in the morning and is a much shorter event. This means that once he’s done speaking, there’s still nearly a full day of trading left, unlike the brief 45-minute window after an FOMC meeting. So, while a volatility crush could occur as he speaks, it may not last.

Today, we also saw the USDCAD turn higher, coinciding with the S&P 500 turning lower.

The USDCAD has found support around the 1.36 level, which aligns with a long-term uptrend and the 200-day moving average. This 1.36 region is a strong candidate for a potential bounce, possibly pushing the pair higher toward the 1.39 area.

The NASDAQ 100 approached the 78.6% retracement level today before reversing and forming a bearish engulfing candle. While these bearish engulfing patterns haven’t been highly effective lately, it’s worth noting that similar patterns formed on July 11 and August 1, both of which led to significant declines in the days that followed. So, this one should still be respected.

The SMH also reached its 61.8% retracement level today and formed a bearish engulfing pattern.

Nvidia also hit its 78.6% retracement level again, forming a bearish engulfing pattern today.

We’ll see how things unfold tomorrow, but plenty of evidence suggests this could mark a turning point for the market overall, potentially creating a lower high.

-Mike