SPX surprisingly pushed lower today, largely due to the AI trade seeing some more selling coming in. Semiconductors and memory stocks were once again the driving force of the push lower, despite the MAG 7 being a mixed bag.

SPX also came just about 20 points from the lower end of the expected move, but we know that this week it is a smaller expected move than we have seen lately. The 7500 level held for now and that will be the line to watch for as we head into tomorrow.

The verticality of the daily chart has been broken but the overall trend still looks bullish. The candle today mostly just took us to the wick of Friday’s candle. For this to be a bearish sign, we would need bearish confirmation tomorrow, which would be a scenario where SPX closes below the lower end of the expected move and ideally begins to retest the 7450 area.

The market seems very reactive and jittery to chip/memory stocks right now and honestly that is not signs of a healthy market. The conviction/sentiment is starting to waver and the momentum seems to be going with it.

The reality check is that today was the first time in a very long time that a Monday morning gap down did not immediately turn green. Dip buyers were largely no where to be found. The obvious answer is that we clearly didn’t dip enough for buyers to step in, but if that is the case, it could mean that further downside is necessary until a comfortable level is reached.

On the shorter timeframe, we can redraw the grey box we were tracking last week and retro-fit it back to about 1 month ago where SPX reached a similar level and then backed off. Something about that 7580 level seems to be hard for SPX to break through. It is one of the stronger resistance levels we have seen in a while. I think 7580 is the only thing keeping SPX from all-time highs.

The lower end of that grey box is around 7350. Is there enough selling pressure to get us there? It seems far away and there are plenty of other key levels before that.

First off, we have the lower end of the expected move around 7485. Next up we have the lows from last week around 7420. If SPX continues to break down, the expectation is that one of those levels should hold. If not, then I think we could easily get to the lower end of the box.

Dip buyers did not take control today, so I may have to with the sellers for now. We could be entering a brief period of ‘sell the rip’ before eventually flipping back to ‘buy the dip’ but let’s see how tomorrow plays out before officially picking a side. In the end, we know dip buyers always win but there could be some opportunities on the short side if SPX continues breaking down.

The market is screaming ‘be cautious’ right now, so let’s not ignore that signal. Above 7580 is bullish and below 7485 is bearish.

Good luck!