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Stocks Brace For Impact

By Michael KramerStock MarketsAug 09, 2022 03:50AM ET
www.investing.com/analysis/stocks-brace-for-impact-200628232
Stocks Brace For Impact
By Michael Kramer   |  Aug 09, 2022 03:50AM ET
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The S&P 500 had risen by nearly 1% at the start of the day yesterday, but by day’s end, all the gains were gone, with the index finishing 12 bps. There are now two bearish trading patterns in the index that I am noticing, given yesterday’s weak close. The first is the rising wedge pattern, which I have repeatedly pointed out. The second is the 2b topping pattern that appears to be present in the S&P, Dow, and QQQ ETF.

The rising wedge in the S&P 500 is easy to see, and it tested support again yesterday. The index attempted to take out the highs from August 3, was promptly rejected, and then closed below the August 3 price of 4155.17. That sets up what I think is that 2b Topping Pattern.

S&P 500 Daily Chart
S&P 500 Daily Chart

QQQ

The same pattern is present in the QQQ ETF, when the ETF tried to take out the highs from August 4 and was promptly rejected.

QQQ Daily Chart
QQQ Daily Chart

Dow

The same pattern is present in the Dow Jones Industrials as well.

DJIA Daily Chart
DJIA Daily Chart

These 2b patterns can be invalidated if the market can clear these prior highs. If not, then the 2b pattern sends that potential reversal signal. This diamond pattern in the S&P 500 futures and the rising wedge also speaks to a possible reversal in the market to come.

S&P 500 Futures 1-Hr Chart
S&P 500 Futures 1-Hr Chart

VIX/VVIX

Additionally, we saw the VIX to VVIX ratio drop again yesterday, most notably because the VVIX index rose by around 3.3% yesterday, while the VIX rose by 60 bps. The declining ratio and the rising VVIX index tell me that very quietly implied volatility is starting to rise again in this market.

VIX / VVIX Ratio Daily Chart
VIX / VVIX Ratio Daily Chart

NVIDIA

NVIDIA (NASDAQ:NVDA) pre-announced its quarter, posting disappointing results and a significant revenue miss. The news was surprising, especially since it was NVIDIA, a company that doesn’t miss very often. Yesterday’s news killed whatever upward momentum NVIDIA had, dropping it below a short-term uptrend. I’m surprised it was down by just 6%.

Nvidia Daily Chart
Nvidia Daily Chart

Microsoft

Microsoft (NASDAQ:MSFT) also looks like it may have that rising wedge pattern in it. Additionally, a bearish divergence is taking place with its hourly RSI. That big gap needs to get filled at some point, too, all the way down around $252.

Microsoft 1-Hr Chart
Microsoft 1-Hr Chart

Netflix

Netflix (NASDAQ:NFLX) rose yesterday, something I didn’t think was likely, but it also looks more evident that that stock has a rising flag pattern. Flag patterns that rise are reversal patterns and tend to result in a drop back to the origin, in this case, around $175.

Netflix Daily Chart
Netflix Daily Chart

Original Post

Stocks Brace For Impact
 

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Stocks Brace For Impact

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Comments (12)
ahmed araby
ahmed araby Aug 20, 2022 12:14PM ET
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ma3ya 3omlah adyma amrrknya
Mario tragik
Mario tragik Aug 09, 2022 11:43PM ET
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oh boy bunch of you guys betting on drop after cpi, guess its time to go long.
Mohd Izhar Muslim
Mohd Izhar Muslim Aug 09, 2022 1:13PM ET
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Thank you for the article 💯
Michael Wilson
Michael Wilson Aug 09, 2022 10:38AM ET
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US CPI indicators pointing up??? First, US Unit Labor Costs came in hot at 10.8%. Not good for core CPI which is the number the Fed is focused upon. Second, Mexico just reported that instead of falling - inflation rose. "Inflation rose to 8.15% in the year through July from 7.99% in June." Also not a good indicator for US CPI tomorrow. Tonight @9:30 Canada reports CPI. If they are also up, how could US be down if our two major trading partners are up?
King Agamemnon
King_Agamemnon Aug 09, 2022 9:38AM ET
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166005210756208.jpg
I see an intact bull channel. Maybe it will expand via some sideways chop but this is a very strong structure and until it breaks all I see is upside. At worst I see a retest of 4000 to bait in the bears and squeeze them on a drop and pop rally.
apostolos sideris
apostolos sideris Aug 09, 2022 9:10AM ET
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🤗perfect!(once again)
Ross Dre
Ross Dre Aug 09, 2022 8:24AM ET
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Excellent charting! It’s been at the top of this downward trend for days. Also negative divergences have picked up on the hourly.
Damian Wahner
Damian Wahner Aug 09, 2022 7:46AM ET
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Good research Michael. Good to be well informed in this market.
Mario tragik
Mario tragik Aug 09, 2022 7:06AM ET
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guess bears never learn
Tom Scheuermann
Tom Scheuermann Aug 09, 2022 7:06AM ET
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bears have done great
Butch Einsel
Butch Einsel Aug 09, 2022 7:06AM ET
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Did you really understand the article
Aaa Kelling
Aaa Kelling Aug 09, 2022 7:02AM ET
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Good article. I enjoy your analyses.
 
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