Promising Start Ends in Disappointment: The Week’s Rollercoaster Ride

Great Start, Rough Finish to Start the Week

The S&P 500 futures saw a gradual rise over the weekend, moving away from the 200-day simple moving average (SMA) of 3,950. The index made a slow and steady climb toward the critical psychological level of 4,000. The market held above 4,000, creating a bullish case for the start of the trading session, with options traders keeping a close eye on this key level.

The market experienced a minor pullback towards the psychological level of 4,000 as the opening bell sounded. However, a controlled move towards the level showed signs of a reversal to continue higher and buying volume stepped back in to help push the market higher during the opening drive.

Market Stalls Harsh Comments 

As the market approached the 4,025 level on the S&P 500 futures, buying momentum began to slow down and selling pressure started to increase, following remarks by Federal Reserve Governor Jefferson who rejected the argument for raising Fed’s 2% inflation goal, citing potential damage to the Fed’s credibility.

After Jefferson’s comments on rejecting the argument for raising Fed’s 2% inflation goal, Morgan Stanley’s announcement that they expect the first interest rate cut to happen in March 2024 instead of December 2023 may impact how investors view the market, as the market has yet to react well to ongoing rate increases.

Too Early to Tell Who’s in Control

For the remaining time in the cash session, the market was spent trading below the Volume Weighted Average Price (VWAP), which indicates that the sellers remained in control. Continuously trading below VWAP is notable because the day will close positively, but not very indicative of who controlled the session. 

Not only did sellers show their strength by maintaining below VWAP, but the market is now below the psychological 4,000 level again.

Key Levels to Watch

Looking into tomorrow’s session, some critical levels are the 50-day SMA, 200-day SMA, and 21-day Exponential Moving Average (EMA). However, either bull or bear case begins with the psychological 4,000 level. While the 50-day SMA is at 3,996.5, combining that and 4,000 will create strong support or resistance in the coming sessions. 

If the market fails to get back through these levels, a downside target is the 200-day SMA at 3,950. The 200-day SMA is also where the last bounce in the market took place to end the previous week.

On the upside, if the market can breach 4,000, reaching the 21-day EMA is possible at 4,050. Another level that you can note on the journey there would be the 4,024.75 level, which was the high of today’s session. 

CCI Leads Economic Data Tomorrow 

Several economic events are scattered throughout the session, but the highest anticipated one will be the Consumer Confidence Index (CCI) at 10 a.m. Eastern. 

Market Closes Green Despite Midday Roll

The Nasdaq and the S&P 500 were positive to close the session. The S&P 500 futures closed up 0.36%, adding 16 points, while the Nasdaq futures closed up 0.79%, gaining 94 points. The Dow Jones futures followed, closing up 0.32%, an addition of 104 points.