Wedge Pops - Quick Note
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The combination of better than expected Advanced Micro Devices (AMD) earnings and Dovish Fed speak during Wednesday’s FOMC meeting revitalized the Artificial Intelligence trade and provided a lift for the stock market. In our “Mixed Messages” article we mentioned that it was time for a bounce and we expected that the market would wait for the FOMC meeting to show it’s hand. That is pretty much what happened, although the rally started early with AMD’s earnings.
The S&P 500 (SPY) gapped up and closed above the 9 EMA (pink), the 21 EMA (blue) and Anchored Volume Weighted Average Price (orange) from the high. This was indeed a “Wedge Pop” pattern, and this change of complexion occurred at the half-cycle low on 7/31.
Oliver Kell’s “Price Cycle” system shown below shows that after a pullback or correction, as price gets oversold, it gathers the energy to do a Wedge Pop back above the moving averages. Wedge Pops are often the start of new trends that can last for a while. We are witnessing this now in many markets. We previously mentioned that a double top is possible and that is now what we expect. However the uptrend can continue as long as price trends above the 9 & 21 EMAs.
The Nasdaq 100 (QQQ) has a similar but weaker look. It did pop above the 9 EMA (pink), but is yet to get above the 21 EMA (blue) and AVWAP from the high (orange). This Wedge Pop also occurred near the half-cycle low so if the QQQ is able to show strength over the next few sessions, it could get over the aforementioned dynamic resistance points in the $475 to $478 area.
The stock market is having it’s oversold bounce and as long as it can stay above the 9 EMA, it has a chance to move higher. We’ll have to be on the lookout to see if sellers step in over the next few trading sessions. The next key economic data drop is Nonfarm Payrolls on Friday at 8:30 AM so be prepared and be nimble.
In the Premium Section we’ll go over technical charts and cycle charts for Semiconductors (SMH) and NVIDIA (NVDA).
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