Key Levels to Watch
RLT Newsletter
Thursday started with a gap down across much of tech, but buyers quickly stepped in and drove prices higher throughout the day. QQQ retested its Point of Control (POC) and the low of Tuesday’s massive bullish candle, and buyers showed up right where they needed to. QQQ then filled its bearish gap for the day and closed with a small bullish candle.
Right now the market is simply digesting an extremely strong week long rally. It is still entirely possible that SPY needs a little more of a retest, which would likely mean QQQ has a bit lower to go as well.
QQQ Daily Chart
The main level I’m watching on SPY is $760, which is the prior all-time high and the low of Tuesday’s candle. If SPY starts closing below that level, it doesn’t mean this bull run is over. It would simply suggest that this move higher isn’t setting up to be another straight vertical rally. It would also increase the possibility that this advance was a really gnarly B wave within the correction that began on June 3.
I don’t think that’s the most likely outcome right now, but it is a possibility. If that’s what we’re seeing, we will get a sharp C wave decline back toward the 100-day SMA and possibly even the 200-day SMA. Even then, as long as the 200-day SMA holds, I would still view that as a buyable event within the larger bull market.
Wednesday’s rally also pushed right into the 1.382 Fibonacci extension, which is about as far as you want to see an expanded flat correction extend. An expanded flat is a correction where the B wave rallies above the high of the A wave before the C wave begins. It’s also known as a bull trap, super-duper mean price action, or just another normal day if you trade Bitcoin.
SPY Daily Chart (Extended Flat Chart)
As I mentioned before, as long as SPY holds $760, and realistically even down to about $756, I think the odds favor higher prices pretty soon. What would change my mind is a vertical selloff where buyers simply don’t show up. That would start to resemble a true C wave. Until we see that kind of price action and a break below those key support levels, I’m still fully bullish on the next leg higher.
Semiconductors continue to hold up remarkably well. Both SOXX and SMH actually finished green after gapping down Thursday morning. Many of the AI and semiconductor names bounced almost perfectly from key support levels, including their 100-day and 200-day SMAs, and several are now breaking higher following outstanding earnings reports.
SITM exploded more than 26% higher, while NET was up roughly 16% as I was writing this. MRVL and ARM both look primed for higher prices, and TXN looks like one solid gap away from blasting off or tanking. Whether that move is higher or lower will likely be decided by the direction of that gap.
SITM Daily Chart
We also saw a sharp gap down in one of the market’s strongest groups lately, cybersecurity. DDOG closed down 19% on Thursday after earnings. Any break below Thursday’s low could send it down toward the $200 area, which lines up with both the prior all-time high and the rising 100-day SMA.
At the risk of sounding like a broken record, I think this pullback is buyable as long as DDOG holds its 200-day SMA. Right now, it simply looks like a healthy retest of the previous all-time high after a strong breakout, which is exactly the kind of price action you often want to see in a healthy uptrend.
DDOG Daily Chart
