The major stock market indices have entered a healthy consolidation mode
The major stock market indices have entered a healthy consolidation mode.
After starting the week in the red, both the S&P 500 $S&P 500(.SPX)$ and the Nasdaq 100 $NASDAQ 100(NDX)$ showed resilience, closing the week flat. This price action occurred as market sentiment reached "Extreme Greed," a cautionary sign that requires careful monitoring for confirmation.
Speaking of the SPX, the week's price action followed the consolidation setup and levels. The index opened in the red and fell to the exact bearish target mentioned in last Saturday's Weekly Compass: $6,208. This move also filled the gap from the previous week.
However, buyers stepped in quickly, forming a hammer-like candle on the 4-hour timeframe and an indecisive candle on the 2-hour chart by Monday's close. After some hesitation on Tuesday, the price successfully reclaimed its key levels on Wednesday afternoon.
Weeks like this one can be exhausting, but they are predictable when you have the right context. The overheated conditions we monitored last week allowed us to anticipate spikes in the $Cboe Volatility Index(VIX)$ and pullbacks that, in this case, were swiftly bought.
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