Subscriber content. To subscribe to the Daily Market Brief please visit Market Services on NorthmanTrader.com. The Daily Market Brief is an in-depth market analysis published each trading day by Sven Henrich before US market open.

The Daily Market Brief keeps investors and traders abreast of the latest market critical technical and macro developments as well as market directional strategy.

We are making some past Daily Market Briefs public so you can get a sense of how we approach markets analytically. This particular brief below was published on March 10, 2023 during the banking crisis which has culminated in a sizable pullback in markets from the February highs.

Our outlook here was for a major relief rally to come.

For context here’s a chart of $SPX with the time frame circled:

For reference please also see without paywall other examples of Daily Market Briefs published during key market turning points. June 17, 2022, August 16, 2022 and October 17, 2022.

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A quick extra brief this Friday as markets are on a cliffhanger going into NFP with some quick chart updates.

As I highlighted last night the larger set up is at risk of invalidating especially if something systemic breaks with the banks and this latest hit on the heels of Powell this week is making everything a bit uncomfortable, but that’s par and parcel during a correction.

In principle nothing’s been invalidated yet but it’s clearly on the edge here.

I’m focusing on futures charts here and we will have to assess the cash implications later for there is always a chance that we are in the middle of an overnight stop run that doesn’t show up in the cash charts later. Unknowable at this writing and it frankly all depends on the coming NFP report.

On the weekly chart the breakout defense is at threat of breaking:

Risk assessment: From my perch a wick below that closes above is fine, a close below would make next week very uncomfortable as it risks a move toward the Decembers lows or the weekly 200MA, so be aware.

That said it hasn’t happened yet at this stage.

In overnight we hit the January 19 lows and have bounced from there as of this writing:

That red support line was one of the levels I highlighted on Live Alerts last night:

We repositioned long $SPX long there and I note that $NDX still hasn’t approached last week’s lows and is fighting for support here on this trend line:

Frankly as brutal as all seems it remains technically very clean at this stage. Note the lows so far also coincided with this trend line:

Which in the larger context highlights how clean the entire structure is as of this moment:

So yes, this could still play as a bull flag:

But it will take NFP and CPI to cooperate no doubt and for banks to stabilize.

So we’re at a very uncomfortable spot here.

The next support level would be 3870 should we drop on NFP and 3860 below that.  Not what I would like to see of course, but again, intra-day dip is ok, it’s the close that matters ultimately.

If we invalidate the set ups we are then faced with the fact that these markets keep getting ever more oversold. But ith banks hitting an RSI of 21 and all the other oversold signals it’s simply not a technically justifiable spot to initiate new short positions even though risk clearly is lower in the short term.

Indeed, and I say this only half jokingly, but not only are $BKX RSIs of below 22 rare they tend to come at times when central banks freak out either immediately or shortly thereafter:

I don’t expect QE or rate cuts here, but if there is something systemic evolving don’t be surprised if they end up pausing QT or something of that nature. So if something breaks here I don’t see Powell raising rates by 50bp in March. Indeed perhaps the bond market is already sniffing this out:

And so he may not do 50bp anyways even if we rally today.

And that reversal in yields is practically setting up for a major relief rally to come if nothing systemic happens.

Bottomline: Fighting time and other than $SPX stops are holding for now on $NDX and we keep dogging the long set up as long as the set up is not invalidated which it still isn’t yet. At the cusp yes, but not dead at this moment. We got a flat stop on the new long $SPX long and now all we can do is wait for NFP, would try again into 3860/70 if it happens. Curious about the close tonight obviously.

Anyways, that’s my latest view on things. GL.

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