Will Powell’s Testimony Cause Market Chaos?
Will Powell’s Testimony Cause Market Chaos?
As the new week began, all indices were observed to be trading above their 21-day Exponential Moving Average (EMA), indicating a positive trend in the market. Using the 21-day EMA to measure macro sentiment is a common approach to follow a bigger-picture trend, making it a reliable indicator for traders.
Typically, when prices dip above the 21-day EMA, it is seen as an opportunity to buy and continue the upward trend. In today’s pre-market session, the S&P 500 futures tested the 15-day Simple Moving Average (SMA) multiple times and it held support consistently.
The 15-day SMA, which is just below the 21-day EMA, indicates that the market is holding a positive trend into the cash session open. As traders keep a close eye on these moving averages, it suggests that the market is expected to remain stable in the short term.
When the opening bell sounded, the Dow Jones futures were the only index that tested their 21-day Exponential Moving Average (EMA) as support, while the Nasdaq and S&P 500 futures showed signs of strength. However, as soon as buyers entered the market to push the Dow higher, the rest of the market followed suit, moving in the same direction.
This resulted in a robust upward directional move for all indexes, with a brief pause as the pre-market high levels were reached. Despite this, heavy buying volume allowed the market to break through and create a strong opening drive.
It is worth noting that the Federal Reserve (Fed) Chairman, Jerome Powell, is scheduled to speak tomorrow, which may have an impact on the market’s movement in the coming days. Nonetheless, the market displayed resilience in the face of uncertainty, indicating positive sentiment among market participants.
During the cash session, the S&P 500 futures hit a high of 4,082.25, but then experienced a triple-top reversal pattern, leading to a downward trend for the rest of the day. The market subsequently moved lower toward the 21-day Exponential Moving Average (EMA).
As Federal Reserve Chairman Jerome Powell is set to speak multiple times over the next few days, the market is currently in a neutral state. However, with Powell’s upcoming testimonies before the Senate and the House, volatility can be expected. Market participants should keep a close eye on the market’s movements during this time.
Creating a Game Plan Ahead of Powell
As the market is expected to experience increased volatility this week, there are specific levels and zones to watch out for.
At present, the zone between the 15-day Simple Moving Average (SMA) and 21-day SMA is a critical area to observe. As long as the S&P 500 futures remain above this zone, the most viable targets are on the upside. These targets include the high of the week, created today at 4,092.5, and the psychological level of 4,100.
On the downside, if the S&P 500 futures drop below the 21-day Exponential Moving Average (EMA) and fail to recover it, downside targets should be considered. The first target is the 50-day SMA and the psychological level of 4,100. Beyond that lies the Point of Control (POC) level and the 200-day SMA at 3,950.
By utilizing these levels as a roadmap, traders can navigate the volatility expected to arise during these events with more confidence and clarity.
Economic Events to Come
Tomorrow, Jerome Powell will testify to the Senate at 10 a.m. Eastern.
Wednesday, The Automatic Data Processing (ADP) national employment report will be released at 8:15 a.m. Later in the session, Jerome Powell will testify to the House at 10 a.m. Eastern. At the same time Powell testifies, Job Openings and Labor Turnover Survey (JOLTS) will be released. Later in the session on Wednesday, Beige Book will be announced at 2 p.m. Eastern.
Thursday, there will be the weekly Jobless claim numbers at 8:30 a.m. Eastern.
Finally, on Friday, the week will wrap up with the Employment report at 8:30 a.m. Eastern. The Federal Budget will be released at 2 p.m. Eastern following the Employment report.
Market Closes Slightly Positive to Begin the Week
The Nasdaq and the S&P 500 were positive to close the session. The S&P 500 futures closed up 0.08%, gaining 4 points, while the Nasdaq futures closed up 0.11%, adding 14 points. The Dow Jones futures followed, up 0.15%, an additional 49 points.