US Market Overview – Sept 6th 2022

Here we entered in month of September. The month of September is known to be notorious in terms of volatility. We have another week with a lot of movement and a bearish close on last Friday.  Similar to the prior week, this week gapped lower on Monday and finished the week with a big ugly red bearish candle. The frustrating parts of the week were the gap higher openings that were quickly sold into and gap down on Thursday that was quickly bought.  Fridays low in the SPY failed to breach Thursday’s low of $390.04. $SPY is back into its trend support. Important level to try to make a higher low, if $SPY holds the $390 level again, it can bounce back towards $395.8, $400.5 area. If $390 level fails, then it can drop towards $387, $384, $381 levels.

US Market Overview – September 6th 2022

The DIA did make a slightly lower low On Friday and closed at the lowest point since mid July.  The QQQs made a slightly higher low but closed weak as well.  IWM had a big move on Friday to fill the gap left from Thursday’s gap down.  It also opened in between the 50 and 100 SMA and was overwhelmed with the market to have the lowest close of the week. $QQQ – Let’s see if it can hold $294.5 level and bounce back towards $300, $305 levels. If this fails and break downward then we can see $288, $285.5 levels possibly. The TNX reached a high on Thursday, after a gap up, to hit 32.95.  The Dollar index continues to make new highs. This week’s high print of 109.97 gets us back into June of 2002 since we have seen price in this area. The VIX did a great job of holding the 25 level.  Friday brought out the VIX sellers, but once the market rolled over they quickly reversed the VIX.

While a few countries have yet to be released, the message from global manufacturing PMIs is clear; new orders are slowing. By our count, just 27% of the countries we track show orders above the 50 breakeven level. Excluding the pandemic, this is the weakest since the Global Financial Crisis. This is pretty ugly signal when you take into consideration that our entire world economy was shut down in 2020. Two out of the last three times we were below 30 we were in a recession.

I would be more cautious than ever as many bearish chart indicators and analyst predict that we are in 2nd phase of bear market. We may see June lows sometime in Sep/October and continue lower than that. My indicators are very straightforward going forward. If we break $SPY 390 then we will see $380 soon.

Here is the weekly $SPY chart and as per my earlier blog, I predicted $390-$395 levels sometime by September. We got there a few weeks early. It may try to bounce from here but if we fail critical support level ($390) then, more pain is coming on downside. Based on CCI, Scholastics and RSI indicators, we still have more room for downside. Downside $SPY butterfly, put debit spread or any other advance strategies might be useful in this kind of trading environment. If you want to learn more advance strategies then please contact us on finxdata.com.