Stock Market Index Triggers Upside Signal


Simpler Trading Team

6 min read

In this article:

  • Key signals fire ahead of moves
  • Will earnings deflate upside swings?
  • Don’t expect an easy road ahead

Is this mixed up market fighting for a sustainable upside rally?

Earnings season to date has been a wild mix of reports that have forced fiery market reactions.

Key signals in the indexes are showing possible big moves ahead.

But will the strength of these signals hold up against news events over the next week?

Index triggers signal for upside moves

Market movement looked promising Thursday after the Nasdaq rebounded higher led by Tesla (TSLA) reporting earnings that were better than analysts expected. Tesla was up almost 10% on the day.

In the market today, the Nasdaq surged to 12,059.61 points for a 1.36% spike. The S&P 500 followed suit with a .99% gain to close at 3,999.10 points. The Dow also finished the day higher, closing at 32,036.90 points to rise .51% (adding 162.06 points on the day).

The S&P 500 – considered the benchmark among the indexes – is up three days in a row and has rallied more than 270 points over the last five sessions.

The S&P 500 – considered the benchmark among the indexes – is up three days in a row and has rallied more than 270 points over the last five sessions.

Thrown together in a bag of mixed earnings reports, various key signals have pointed to the market moving higher.

Some signals are firing for the first time since March, according to Danielle Shay, Vice President of Simpler Trading.

She pointed out how price action has broken above key moving averages.

For example, the Nasdaq – before Netflix (NFLX) earnings Tuesday – broke through overhead resistance on stock charts and traded above the key moving averages for the first time since March, Danielle stated.

Key moving averages include –  8-day exponential moving average (EMA), 21-day EMA, 34-day EMA, and 50-day simple moving average (SMA).

Another signal to watch, according to Danielle, is the Volume Zone Oscillator (VZO) which has leaned toward a bullish daily squeeze since July. The VZO indicator tracks volume and momentum changes.

“You can never 100 percent know if the squeeze will fire to the upside or to the downside,” Danielle said. “The majority of the time, the squeeze fires in the direction of the trend – which is down.

“But, this squeeze is demonstrating positive volume and momentum, in addition to key technical breaks higher as well. All of this is pointing to that squeeze actually being a countertrend, bullish squeeze. It just needs a catalyst.”

Could the Tesla positive earnings report be the catalyst that pushes the market higher?

“I’m not saying the final low is in, but we may at least get a sustainable rally,” Danielle said. “To see which way it goes, I’ll be highly focused on this index price action in addition to the reaction post-TSLA earnings.”

Build wild market watchlist with scans

This wild market means price action moves quickly, and traders need an automated tool to track key stocks.

Stock scanners work within computer software to evaluate signals on a stock chart that follow specific targets set by the trader. Computers can track many companies around the clock and maintain a trading watchlist focused on a trader’s personalized setups and strategies.

This helps traders quickly disregard stocks they don’t want and concentrate on stocks with potential.

Earnings events may deflate rallies

As earnings season heats up further, the burning question for traders is whether this upside spike will continue or pull back once again.

Events next week may deflate any upside movement when some of the largest technology companies that fuel the Nasdaq report earnings.

This includes Apple (AAPL) which has warned of upcoming uncertainty in its earnings report due to potential layoffs. These can be attributed to higher costs of business due to lost sales in overseas operations thanks to the U.S. dollar spiking higher.

Add into the mix the expected Federal Reserve (Fed) announcement of higher rates on the same day Apple and Amazon report earnings, and the market could get crazier.

While the market has rallied on bad earnings that were not as bad as expected, Bruce Marshall, Director of Options and Income Trading at Simpler Trading, isn’t convinced that the market is done on the lower end.

“If (these events) are going to be a change in the trend, we won’t know it until the market breaks above key levels,” Bruce said.

The market overall has been in a downward trend all year where it gaps down, then rallies higher, but continues the overall downtrend. This up-and-down movement has been repeated so regularly it’s almost dizzying.

Bruce is cautious that the latest Tesla earnings-fueled spike may just be another big bounce followed by a failure in a year of market failings.

Pro traders work market in online community

This stock market has presented some testy waters for retail traders, especially those looking for a way to trade with a professional.

Simpler Trading put together an online community like never before – a free trading room. This online training chatroom is designed to allow traders to experience the insight from a professional trader during live market hours.

There is no cost to join, and this opens an opportunity to meet our team of traders working to share what they experience daily as stock market retail traders. Learn more today.

Trading won’t get easier anytime soon

This market has shown a strong inclination for wild swings.

The volatility includes repeated intraday swings in the S&P 500 of 50 to 100 points in both directions as the market moves higher within a downtrend.

Simpler’s traders know that this volatile environment makes for tough trades. The focus is to watch key levels to better understand and anticipate the next big move.

Our team has no expectations that this market will get any easier to trade anytime soon. Simpler’s traders keep spinning that old broken vinyl that sings – stay nimble and hold fewer active trades to manage tight risk control.

This is a day-by-day market with more significant events just around the corner.