Don't Catch a Falling Knife

Don't Catch a Falling Knife

Today's S&P 500 Technical View

Don't Catch a Falling Knife
Don't Catch a Falling Knife Getty Images

This week turned into a bullish parade with price marching up to 2800, but buyers were left lonely and stranded above 2800 as the market experienced a 62-handle pulllback from Tuesday’s high to today’s low.

We are holding firm on a broader technical basis that this market is ripe for dip buyers, but of course, we urge caution.  We are not buying until we have a reason to buy, meaning that we want to see some technical objectives met on the chart first, as well as a slowdown of selling momentum.  In other words, we don’t want to catch falling knives.

Today we will look at a technical view of the S&P 500 futures using the hourly candlestick chart below, which covers the first half of March.

First, to the upside, we are watching the trend line in orange currently at 2757, which connects Tuesday’s high to Wednesday’s high. If bulls break through and hold above this trend line, then our target would be yesterday’s regular session open, marked in green at 2780.25. Above that, we would look to the pink zone near the top of the chart as a target, which ranges from Monday’s to Tuesday’s highs at the 2804 to 2807 area.

 

 

To the downside, the first area to watch is the green trend line at 2752 drawn from the March low to yesterday’s low. If price moves and stays beneath this line, then we would watch today’s overnight session low of 2745, shown in yellow, and then Friday’s non-farm payroll low of 2735.50, marked in orange. This area is where bulls would need to start digging in their heels to save the rally.

Below that, we would look to Thursday’s 2722 low marked in red followed by the 2700.75 low from last Wednesday. If bulls lose 2700, then we would revert back to a neutral or perhaps even bearish bias.

 

Our view:

First, trade small.  This market remains too volatile to plant our heels in, as it were. Our second rule for this market is to never fall in love with your positions. Be ready take profit at responsible locations and to stop loss maintaining minimal risk.

 

Today’s economic calendar is the most full of this week, as listed below.  We will especially be watching the 10:00 housing number.

  • Weekly Bill Settlement
  • 3-Yr Note Settlement
  • 10-Yr Note Settlement
  • 30-Yr Bond Settlement
  • Jobless Claims 8:30 AM ET
  • Philadelphia Fed Business Outlook Survey 8:30 AM ET
  • Empire State Mfg Survey 8:30 AM ET
  • Import and Export Prices 8:30 AM ET
  • Bloomberg Consumer Comfort Index 9:45 AM ET
  • Housing Market Index 10:00 AM ET
  • EIA Natural Gas Report 10:30 AM ET
  • 3-Month Bill Announcement 11:00 AM ET
  • 6-Month Bill Announcement 11:00 AM ET
  • 10-Yr TIPS Announcement 11:00 AM ET
  • Treasury International Capital 4:00 PM ET
  • Fed Balance Sheet 4:30 PM ET
  • Money Supply 4:30 PM ET

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