Following last month’s rollercoaster ride for stocks and indices, it’s no surprise to see markets come to a pause and trade in a narrow range, at least until Friday, when we have some inflation data in the form of the CPI and core CPI.
Of the two, the FED tends to pay more attention to the latter. The releases precede next week’s FOMC, where the FED is expected to raise rates by a further half a percentage point.
From a technical perspective, it’s also no surprise to see the price action come to a halt given the resistance on the weekly chart, which is both price-based as denoted by the hatched blue lines created by the accumulation and distribution indicator. In addition, the price action is trading in a high volume node and below the volume point of control, which will add its own weight and hamper any quick move higher.
But the good news for the Invesco QQQ Trust (NASDAQ:QQQ) is the move higher was at least accompanied by some decent volume.
On the weekly chart, we have a quartet of down candles breaking away from the volume point of control at the 320 region on rising volume at least on the first three. The only average volume appears on the fourth candle, signaling that perhaps the selling was coming to a halt--which was confirmed by the deep wick to the lower body suggesting a degree of buying.
While the subsequent bullish engulfing candle only has an average volume, if we overlay these two candles and create a two-week chart (see below). We have a nice hammer which was enough to stop the slide and reverse the index—at least to the resistance levels on the weekly chart.
It remains uncertain whether this is enough to take the reversal higher, but the one element required is volume—plenty of it. On the downside, the levels are the channel support at 304, followed by the S2 & S3 pivots at 299 and 295, respectively, and thereafter a retest of this year’s low at 280.