After a swift and strong rally off the late December lows, and subsequent rejection of strong resistance, the market has lost its momentum.
After several failed attempts to break resistance, the market has begun to roll over, putting some downside action back in play. I was looking for this most recent test of resistance to result in a strong break through it, however the market has other plans for now.
As such its tough to ignore the short term probabilities that the recent momentum shift brings with it.
Right now $IWM $QQQ $SPY have all triggered a momentum sell signal. Notice how the first to trigger was small caps. Small caps continue to lead the way for this market. As such I think,once again, they will lead the way off the lows.
While I thought the recent bought of sideways action was consolidation was a set-up for more upside, the market has other plans. I have to adapt to the change and I am looking for the market to go lower before it heads back up and breaks that key resistance level for good.
Of course the NFP just came out with a giant miss. 20k headline missing the big near 200k expectations.
Futures are falling.
How smart was this market to start rolling over ahead of this print? The price action from here will also give us clues about what the market sees ahead.
For now momentum has turned.
When and where will it stop?
I think $IWM will be the first to turn.
The $145 area should offer strong support. A reversal from there would set up a wonderful intra-year inverted head and shoulders pattern.
It will offer enough downside to not only keep those bears involved but to scare those bulls out of their positions.
If that $145 level does not hold. A move back to the late 2018 lows for small caps would certainly change my perspective going forward. As it stands now, I think later this year we will be seeing new all time record highs getting hit.