Massive Rally Fights To Hold On

Massive rally fights to hold on

Overnight the stock market rallied through the psychological level of 3,700 and burst through the 21-day exponential moving average at 3,730. These levels provided strong support throughout the night and into the cash session today. When the bell sounded and the cash session began, S&P 500 futures (/ES) were already trading up 2% or 78 points.

The momentum that started Monday and into today’s opening quickly halted. All the continued momentum for the market was bringing the Nasdaq to its 21-day exponential moving average (EMA). This push to liquidity was enough for the selling pressure and volume to come in and bring the market back down to reality.

Sellers took no time stepping in and slowly bringing the market lower. This opening drive for the market did not look like anything other than controlled selling. The panic slowly started to build but ultimately never took over as the market found support at the psychological 3,700 level.

Using Volatility Index to gauge panic

Traders can use the Volatility Index (VIX) to gauge panic and fear in the market. Extreme panic and fear are typically indicated by VIX being above 33 and topping out at 35. Around this area on the chart, the market has found temporary bottoms this year. When the markets have rallied, VIX has fallen below 30 and has been a leading indicator.

The psychological level of 3,700 and VIX of 33 pushed the market higher after the mid-morning sell-off. Both the S&P and Nasdaq were able to defend themselves from going negative on the day.

Apple shakes up the market

With over an hour remaining in the session, Apple (AAPL) came out with market-shaking news. Apple announced they would cut iPhone 14 production just two weeks after its debut. This shocking news made the market fall 45 points before being held up by 3,700. 

The market finished the day strongly by rallying 50 points off 3,700. This rally was helped by anticipation of earnings. The acceleration to the upside was then fueled shortly after the close by positive Netflix earnings. Netflix reported a beat on Earning Per Share (EPS) of $3.10, beating expectations of $2.20. Additionally, the ad space has been sold out. This could help other names in the space, such as Snapchat when they report Thursday after the close. 

Tomorrow’s earnings report

Tomorrow the notable names to report will be Advanced Semiconductor Material Lithography (ASML) before the opening. Additionally, Tesla Motors (TSLA) will report after the bell. Both names can shake up the market. 

The market closes green again

The Nasdaq and the S&P 500 were positive to close the session. The S&P 500 closed up 1.03%, gaining 38 points, while the Nasdaq  closed up 0.73%, a gain of 77 points. The Dow followed, closing up 1.05%, adding 315 points. The volatility index closed under 35.