Well, that was quite the day for the markets. As discussed in the weekly update yesterday, the expected move coming into the week was about 82 points for the SPX. SPX closed down 88 points today. In fact, earlier today it was down nearly 138 points, or just slightly over a 1.5 standard deviation move.

In my weekly update, I mentioned that the volatility contraction late last week and the market sentiment being highly complacent had me worried about possible volatility expansion and a move larger than 1 standard deviation coming this week. Well, that ended up happening today. However, I was expecting this move to happen over the course of several days and not just in 1 day. Sometimes the market catches everyone off guard and sometimes you can be right, but at the wrong time.

We can see that the candle for today opened and closed below the lower end of the expected move. The daily candle being green could be seen as a positive, especially since we made the low of the day almost immediately after the open and spent the rest of the day slowly grinding up.

Looking at the chart above, we can see that slow grind up in a little bit more detail. To me, it looks like most up moves were quickly sold throughout the day, and we rejected breaking back into the expected range a couple of times. While the market closed the day with a big spike up, we have not seen too much of a follow up in after-hour trading, at least as of this post. In fact, /ES futures are selling off currently.

On the /ES futures shown above, we can see that we halted the rally at the 50% fib retracement of the most recent down move. 6055 is a must break for the bulls to regain control, and if that breaks, we could rally to the 6086 area or above. Should the rally fail, I expect a test or break of the lows, falling below 5948.

From a momentum perspective, /NQ looks to be running out of upside steam on the 30-minute chart. This was the weakest index today. The momentum indicators shown below, ADX and ATR, are declining pretty sharply.

The talk of the town today was obviously NVDA, and we can see below that we finally broke out of the range we have been in for several months, as denoted by the grey box. I’ve spoken about this grey box at length for the last couple weeks and how a break above or below could fuel a big move. That finally happened today.

We first entered that grey box in October and have chopped around sideways for over 3 months now, ping ponging between roughly 130 and 150. Today we broke well below that range, to levels not seen since early October 2024.

In the chart above, an argument can be made for the red trendline but personally I don’t buy it. The blue line is the 200-day moving average and we broke, and closed, below it for the first time in over 2 years! This is a significant level, but sometimes we see abrupt breaches during times of high volatility. I think it’s important for NVDA to regain the 200-day MA and close above it.

Should NVDA fail to rally and not regain the 121-125 range with conviction, I would not be surprised to see it fall into the low 100s, erasing another few hundred billion dollars in market cap.

From my experience over the last 2 decades or so doing this, overnight lows that come from a huge flush of capital are typically retested again, or at the very least price tends to gravitate towards that supply zone. Despite the majority of the down move coming in extended hours, there is a high probability of gravitating back below that level within the coming days.

A break below the grey supply zone could see us push down towards the most recent lows.

I had mentioned in the weekly update yesterday that this week was going to be one of the biggest weeks we have seen in the markets in a long time, and so far, the price action has not disappointed.

Good luck out there!