What Goes Up Must Come Down

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Alex Partida

Oct 14th 2022  .  3 min read

What Goes Up Must Come Down

More economic data entered the market ahead of the opening bell today. Retail sales data released at 8:30 A,M. EST gave an additional boost to the indices pre-market. Numbers from the report Indicated 0.0%, beating expectations 0.3%, and the previous 0.4% 

Momentum generated from the favorable report quickly fizzled once the cash session began. There was an early attempt to push higher, but the selling pressure was enough to stall the market ahead of the University of Michigan (Umich) Consumer Sentiment Index.

Umich reported numbers higher than both the expected and the previous report. Data showed a figure of 59.8. worse than the expected 59.0 and last month’s 5.86. These numbers sent the market lower for the remainder of the session.

The Umich report identifies the of zooming out and looking at macro market conditions rather than hyper fixating on price action. 

A Simpler News article titled “Short Covering Rally Pushes Market into Overdrive” covered this by stating, “In the macro, the stock market sentiment is still bearish. Short-term price action should not be mistaken for a macro sentiment shift.

The Umich catalyst contributed to today’s price action, but nothing changed in market Sentiment, structure, and liquidy. 

Still the same market

The big picture tells us that the overall market fundamentals haven’t changed. Thursday’s short covering rally, the third biggest intraday swing in history, was quickly squelched by resistance and liquidity. Market sentiment will not change unless the indexes can hold above the daily “mean” or the 21-day exponential moving average. Structurally the market failed to make a higher high and put in another lower high.

Simpler News laid out the line in the sand for today at 3,700 by saying, “On the downside, if the market remains below 3,700, there is the point of control (POC) level at 3,670 and another psychological level at 3,650.” 

The rest of the session went downhill as soon as the market broke below 3,700. Psychological levels 3,650 and 3,600 quickly came into play.

A new line in the sand is made

To end the day, the market saw controlled selling down to 3,600, where the new line in the sand will begin next week.

Next week is relatively light on the economic data front. The market will be free to roam unbothered with little to no expected catalyst.

Roadmap for next week

Targets above 3,600 will be Psychological levels of 3,650 and 3,700, with the point of control (POC) sandwiched in between at 3,670.

On the downside, below 3,700, targets of psychological levels 3,550 and 3,500 will be in play. The Consumer Price Index (CPI) report on Thursday created a new low of the year at 3,502. All eyes will be on the market next week to see if a new low on the year comes. 

The market finds no continuation and goes negative

The Nasdaq and the S&P 500 were slightly negative to close the day. The S&P 500 closed down 2.30%, losing 84.5 points, while the Nasdaq closed down 3.02%, a loss of 335 points.