OpEx Week Looks to Set the Next Big Move

OpEx week looks to set the next big move

The battle between buying pressure and selling pressure at liquidity has persisted. Although there is no clear direction at the time being, this could be big money on Wall Street getting positioned for the next leg down. With options expiration (OpEx) week and earnings season brewing, indecision and volatility are no surprise. This volatile rollercoaster-like price action has been seen throughout this week, but let’s dig into how these levels play out. 

Morning rally eventually fizzles.

When the opening bell sounded, the S&P 500 futures opened right around the psychological level of 3,700. This level has been the line in the sand for most of this week. When the price has been above this level, there has been a path of least resistance to the upside. The S&P has seamlessly pushed toward the 21-day exponential moving average (EMA) at 3,730 when above 3,700. Today’s action consisted of holding 3,700, rallying beyond the 21-day EMA, and peaking near the psychological level of 3,750. 

Once again, the market was able to rally to liquidity and then quickly struck down. After breaking through the 21-day EMA and reaching the psychological level of 3,750 in the early morning, the market started to sell in a very controlled manner. Volume and selling pressure were notably reasonably consistent throughout the remainder of the session. 

The importance of POC moving up

The only time the market seemed to have any different reaction than a steady sell pressure was at the point of control (POC) level. POC is located at 3,692. The importance of noting this level is that it has risen from the previous location of 3,604. When this occurs, it indicates that big players on Wall Street are indeed positioning themselves here.

As the introductory paragraph mentions, all signs point to the market setting up for another leg down. This thesis considers price action near the 21-day EMA, POC positioning, and this year’s overall market sentiment.

It is imperative to remember during times like this; nothing has fundamentally changed in the market. The reasons that this market has continuously gone lower this year are still present. 

Key contributing factors to this market sentiment that will need to change are still: inflation, interest rates, and negative gross domestic product. The gauge for these shifts can be broken down into three key indicators: employment numbers, consumer spending, and mortgage rates. 

Big picture thesis in a nutshell

Overall, the significance of price action today is that the theme has stayed the same. Yes, the market has been able to rally in the short term, but these rallies have just been to liquidity with no actual continuation. For market sentiment and structure to change, the market will have to get above the 21-day EMA and hold. Until this happens, the market is showing its hand before the next big move.

Indexes close red

At the market close today, the Nasdaq and the S&P 500 were negative at the end of the session. The S&P 500 closed down 0.81%, losing 30 points, while the Nasdaq closed down 0.54%, a loss of 57 points. The Dow followed suit, closing down 0.23%, declining 70 points.