The stock market is setting up to make a big move within the next day or two.
Stocks have been trading back and forth in a tight trading range for the past couple of weeks. The S&P 500 is stuck like a magnet to its 9-day exponential moving average. It’s been storing up energy for the next big move. Now, it needs a catalyst to make a big move one way or the other.
That catalyst could come tomorrow in the form of the monthly jobs report.
Stocks often make a volatile move in response to the jobs report. It doesn’t really matter if the report is seen as good news or bad news. It merely gives the market the necessary excuse to make a larger move. And after a few weeks of choppy, back-and-forth action, the S&P 500 is now set up for that larger move.
Take a look at this 15-minute chart of the S&P 500…
Remember, this is a 15-minute chart – so it deals with ultra-short-term moves in the market. Patterns on this chart tend to play out within one or two days (as opposed to patterns on daily charts which can take weeks to play out).
This chart has formed a series of lower highs and lower lows. That’s a short-term downtrend, and it’s bearish. The S&P needs to rally above the blue downtrending resistance line in order to break the pattern and reverse the momentum back to bullish. A breakout above 2440 should lead to all-time highs and perhaps a rally all the way up to the 2773 level.
Otherwise, if the S&P can’t get above the 2440 level, then look for the index to make a lower low below the 2407 level it hit last week.
At this point, I think the odds slightly favor a bearish move – though not by much.
One way or another, though, the market looks set to kick off a larger move within the next two days.
Best regards and good trading,
Jeff Clark
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