The stock market declined today as technical conditions suggested and our levels validated.
Last Saturday, the Weekly Compass presented a high-probability bearish reversal for the $S&P 500(.SPX)$ , marking the loss of 7,773 as the key trigger that would validate the thesis, a level not far from Friday’s close, and in fact, a level breached during Monday morning in market hours with no gaps or premarket surprises.
Following yesterday’s decline in the SPX and $NASDAQ 100(NDX)$ , I studied the semiconductor rally, highlighting the gaps on $VanEck Semiconductor ETF(SMH)$ , $Micron Technology(MU)$ , and bearish setups for $NVIDIA(NVDA)$ and $Taiwan Semiconductor Manufacturing(TSM)$ . As it has happened before, those gaps were filled rapidly during today’s session.
Given the bearish reversal risk described yesterday, I posted the daily levels for MU, NVDA, $Advanced Micro Devices(AMD)$ $Broadcom(AVGO)$ TSM, and SMH, alongside our usual daily levels for SPX and $E-mini S&P 500 - main 2609(ESmain)$ .
When MU opened below the anticipated central daily level (CDL) of 1,014, the downside elevator was activated, sliding until the central weekly level of 933 acted as support. A similar move played out when NVDA lost its central daily level of 225 and AMD lost its CDL of 509, with these two stocks losing their crucial central weekly levels (details below).
Daily levels function as early warnings. In addition of losing the central daily levels, the anticipated daily supports at 992 (for MU) and 501 (for AMD) were lost as well. Using those levels to set protection for long positions help to protect capital, in this case against a -7% total daily selloff in MU and a -4.3% drop in AMD.
Similar case played out on the SPX. The anticipated central daily level published yesterday was 7,760, with the next line of defense at 7,729. Price action faced rejection near the 7,714 level at the open, leading to a choppy session that closed near 7,683.
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