SPX and NDX Weekly Update - Nov 8, 2020

This is FREE Mini Blog, covering only SPX and NDX.


SPX Cash Index Daily chart, with DMA50 and DMA200

SPX is inside possible triangle formation, and February high with the DMA50 is in the middle. Confluence of these two references could be the bull-bear line. Possible scenarios:


#1 Strong market would not go below much below DMA50, and could try to push above the upper triangle trendline with only a shallow pullback first. Such a break then likely leads to ATH, and possibly to new ATHs.


#2 Dip below DMA50, could be:

a) just a spring below and then higher, OR

b) to lead the price toward lower trendline, where we can expect buyers reaction.

Support 3200-3233 must hold to keep the short-term bullish case alive.


#3 Breakdown below lower trendline and S zone - would likely lead at least toward DMA200



NDX Cash Index Daily chart, with DMA50 and DMA200

Very similar situation like on SPX. Price already poking above the upper trendline of the possible triangle. Note the huge gap up on Election day - from 11,356 to 11,565. Top edge of this gap, together with DMA50 and 11,600 level is Support now. Bottom edge of the gap is also Support.


Strong market would HOLD above DMA50 and 11,600. Break of the upper trendline likely leads toward 12,200 and ATH. Sustained upside momentum could lead to new ATHs.

Acceptance below this gap would be a RED FLAG for buyers, while breakdown below lower trendline could open a bigger dip, possibly toward DMA200.

CONCLUSION:

DMA50 is important on both SPX and NDX. Both markets are more bullish then bearish, although in short-term trading we can find setups for both long and short. With US Presidential Election practically over, markets could turn their attention to other fundamental factors as well, like Coronavirus cases and second wave. DO NOT FIGHT against the strong directional move.


No point in busting our heads and overthinking, when we have charts. Bullish setup - you are long, bearish setup - you are short. Know from where the bigger risk lies, so you would now what trade can be just hit and run, and what could be the bigger winner.


IMPORTANT: Setups are not some mechanical thing that we can apply in any given condition. We must understand CONTEXT of each trading day, situation on large time frame charts, is market trending or ranging. Bullish setups will work better in bullish environments, and bearish setups will work better in bearish environments. Have the strategy for bullish, bearish and neutral environments.


Cheers, Relja a.k.a. StrayDog