Stocks closed lower on Monday by around 90 bps on the S&P 500. The sell-off came late, pushing the S&P 500 to approximately 3,960. Four thousand served as a robust level of resistance all-day, which is no surprise given that it is the highest concentration of gamma. That should continue as resistance unless call options are added to higher strike prices. If 4,000 remains, it looks like the index can be topping out.
The S&P 500 also managed to retrace to the 61.8% level of the August peak to the October CPI low.
Yesterday’s high also marked the 1.618% Fibonacci extension off the November 2 lows.
The structure of the S&P 500 futures looks terrible, and these patterns we have seen a lot in 2022. I might need to redraw the diamond top later. We just saw something similar at the end of October and the beginning of November, and typically these structures are unstable and lead to a new low. Today will be an important day to see how it plays out.
VIX
For the VIX, there are lots of calls above the 23 strike price and many puts below. It also looks like a diamond or inverse Head And Shoulders on the VIX. This makes sense since the VIX trades inversely to the S&P 500. The owners of all the calls set to expire Wednesday need to get the VIX up soon if they want a chance to get them in the money.
AMD
The move higher in Advanced Micro Devices (NASDAQ:AMD) is bizarre, given how bad its results and guidance were. If AMD stopped and reversed here, it wouldn’t be a surprise, given it hit the 38.2% retracement level off the August highs yesterday.
JP Morgan
It looks like JPMorgan (NYSE:JPM) may be ready to turn lower. The stock appears to have formed a bearish evening star Doji. The equity also stopped at resistance around $135, and the RSI seems to be rolling over after becoming overbought.
Goldman Sachs
I still don’t understand why Goldman Sachs (NYSE:GS) has risen a jaw-dropping 30ish% since earnings. Maybe I missed something along the way. On top of that, the RSI is well above 70.
Financials
I point out JPM and GS because the financials sector has driven the market higher, and if that part of the market goes, the market will lose a key leader. The XLF rose to resistance around $35.65 on Friday and reversed yesterday. The trend line is still higher, but there is a considerable gap to fill around $34ish.
