Good Tuesday Morning, MPTraders! November 21, 2023-- Pre-Market Update: Question: When the dust settles after this afternoon's FOMC Minutes (from the Nov. 1st meeting) and after NVDA's highly anticipated earnings report after 4 PM ET today, will the capital market indices (equities and bonds) remain "bid," suggesting that the FOMC discussions coupled with NVDA's report and guidance added new bullish underpinnings to markets that have climbed relentlessly since the end of October?
Alternatively, will whatever the Fed and NVDA have to tell us underwhelm traders and investors, likely triggering a potentially violent corrective period atop the 10%, four-week vertical advance?
Or lastly, will the stock and bond markets grind higher regardless of the news largely in sympathy with the very powerful Thanksgiving and November historical seasonal bias?
My expectation based on my pattern and momentum work is for the news to create a spike-high in the equity indices in the aftermath of NVDA's earnings during tonight's post-market session or overnight into Wednesday's session.
From the perspective of ES, my attached 4-Hour Chart shows that the index is at a crossroads: resistance hovering from 4560 to 4600, which should put a lid on strength ahead of the onset of a meaningful correction that will point to 4400-4430 initially.
However, if 4600 is hurdled and sustained in reaction to perceived dovish FOMC Minutes AND new bullish guidance from NVDA, then my work will trigger a higher upside target window of 4800 to 4880, in which case any forthcoming correction should be contained above 4500 in route to 4800-4880.
Accompanying my 4-hour ES Chart are two pictures that argue for a correction sooner than later, and from beneath 4600, or after a failed attempt to hurdle and sustain above 4600:
The percentage of NYSE stocks above their 20 DMA has climbed from very oversold in the mid-teens during the October decline to 73.5% as of yesterday's close, considered moderately overbought and at or approaching a sentiment hurdle that argues in favor of a price correction...
And then we have Cash VIX, which hit a DSI reading (Daily Sentiment) of 9 at yesterday's close. Historically, single-digit readings in DSI are rare and also indicate that traders and investors are "beyond complacent" and exceedingly confident that the SPX has nowhere to go but up... and if it goes down, it's a BTFD! Cash VIX itself is pressed to new post-10/23/23 low at 13.39 this AM, and is poised to test and possibly break prior lows during the past 6 months recorded between 12.70 and 13.00...
Bottom Line: Buyer beware in the aftermath of the market reaction to the Fed Minutes and more so to NVDA earnings after today's close, unless ES rips and sustains above 4600...