The S&P 500 finished lower yesterday by around 60 bps to make a new closing low in this downdraft at 3900.78. At this point, it seems like the market makers are just pinning the index to that round number for the opening print for tomorrow’s options expiration. Then after that, all hell can break loose; I’m joking to some degree.
S&P 500
The technical setup does not look favorable, and I wouldn’t say I like the consolidation candle today. There have been six occasions of this candle happening. Four of those times, the day after, the candle saw a big move in the same direction as the day before the consolidation/Doji candle. It doesn’t have to be a big down day, but I wouldn’t say I like the odds of it not being a down day.
Additionally, another flag pattern has formed on the S&P 500 5-minute chart. That would also point to lower prices and break below 3,860. I think based on the projection of the first leg down, it could even result in the index ultimately bottoming out around 3,700. That doesn’t mean it has to happen in one day, of course, but over a couple of weeks.
I also think we are now in Wave 5 down, as I noted on Wednesday, and based on that wave count; I think we are now starting a minor wave 3 of that wave five down.
TIP
Based on what I saw, the 10-Year TIP auction didn’t appear to be strong, which caused the yield to surge. That sent the TIP ETF into reverse yesterday after starting the day higher. The only good news for the bulls is that TIP ETF has been holding firm, offering a potential bright spot. However, the chart does not look good at this point.
Apple
Apple (NASDAQ:AAPL) fell 2.5% yesterday and closed below that $139 area I mentioned on Wednesday. The chart shows that the stock rallied with minimal interruption from June 3, 2021, to July 14, 2021, and that region where the stock moved higher doesn’t offer much in the way of technical support, which makes me think that those low $120 is likely to be the most likely stop.
Meta Platforms
Meta Platforms (NASDAQ:FB) has been consolidating for months and has formed a diamond pattern on the daily chart. Typically diamonds are reversal patterns, but I’m not sure that is the case for Facebook. Sometimes these patterns can also be continuation patterns in my experience. We should know very soon because the shares are very close to breaking the uptrend, and if that happens, the stock will head for new lows.
