Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

Stocks Rally As Reversal Warnings Grow Bigger

By Michael KramerStock MarketsMar 25, 2022 02:50AM ET
www.investing.com/analysis/stocks-rally-as-reversal-warnings-grow-bigger-200620814
Stocks Rally As Reversal Warnings Grow Bigger
By Michael Kramer   |  Mar 25, 2022 02:50AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

The S&P 500 rose by around 1.4% yesterday, and what seems to have become churning at the top, and should lead to a reversal of a trend. The pattern to this point is looking a lot like that of the end of January. From the big rally off the lows to this churning pattern that is now taking place.

Again, to repeat the upside is very clear and easy to predict, because we all know the next level of resistance comes at 4,580. The problem is all of the patterns suggest that doesn’t happen.

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

What is sort of strange is that despite the S&P 500 closing slightly higher than it did on Tuesday, the RSI fell by just a touch to 59.28 versus 59.96 on Tuesday. Also, volume levels appear to have eroded as well, which is particularly important, especially in a thin market like this one.

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

There is also a clear downtrend in the RSI, as well as the 600-hour moving average is acting as resistance. As dumb as the 600-hour moving average with Bollinger bands may sound it has actually been pretty at good a defining trading range.

SPX 1-Hr Chart
SPX 1-Hr Chart

So if the patterns continue to hold, then they would suggest that a drop is coming. The index continues to also follow the typical options expiration pattern as I noted over the weekend, with the first two days of the week following through and then some consolidation. Additionally, the reserve balances on the Fed balance sheet fell sharply this week, as I expected it would. Reserve balances have acted as a pretty solid leading indicator to stock prices since QE started to get paired back. The balance sheet started to fall last week.

SPX-FARWBFRB Index Chart
SPX-FARWBFRB Index Chart

NVIDIA

So did NVIDIA (NASDAQ:NVDA) find greener pastures, or is it merely in the process of being put out to pasture, that’s the question. The stock rallied on a very apparent gamma squeeze, which was noted by a lot of call activity expiring tomorrow at the $270 and $280 strike prices. It is very easy to see the big drop in the SKEW and the tremendous rise in the call volumes.

Nvidia - Historical Volume
Nvidia - Historical Volume

Besides, it looks like NVIDIA is merely playing a game of catch-up to its analog with Cisco (NASDAQ:CSCO) from the year 2000.

NVDA vs CSCO Price Chart
NVDA vs CSCO Price Chart

Original Post

Stocks Rally As Reversal Warnings Grow Bigger
 

Related Articles

Michael Kramer
Stocks Rally As Rates Plunge By Michael Kramer - Sep 29, 2022 10

Stocks jumped yesterday after the Bank of England noted it would help to stabilize the British bond market. Rates fell dramatically across the curve in the UK, resulting in rates...

Stocks Rally As Reversal Warnings Grow Bigger

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (4)
taylor jason
taylor jason Mar 25, 2022 7:41AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
there is also a bearish divergence in market breadth compared to market price. I think we all know the next leg is right around the corner,but the question is, what will be the catalyst?
Damian Wahner
Damian Wahner Mar 25, 2022 7:16AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
So you say this market is heading south again?
Al Ose
Al Ose Mar 25, 2022 6:26AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
If reversal occurs, Reversal to what level? Thanks
Chad Richer Than You
Chad Richer Than You Mar 25, 2022 5:52AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
DCA and hold
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email