Earnings Season is upon us and several markets have bounced such that an update to my Levels is in order.
For the week, the option implied move was computed at 46 points over the weekend. We have tested and remain above the weekly Magnet and also cleared the important FOMC Level of 2585, as well as the psychologically important 2600 Level, so now we will monitor for follow-through towards 2626 and the upper edge of the implied weekly move at 2642.
Tomorrow has several important catalysts across assets.
Market-moving earnings releases from the likes of Bank of America, US Bancorp, Goldman and Netflix are on deck.
Interestingly, when analyzed, Netflix has a lower risk than the Financial Sector with respect to their earnings release.
A key Level in the Financial Sector (XLF) is 25. Recall, breaking below the 26.50 level catalyzed the sell-off in early December. Recovery through and above 25 coupled with positive momentum in the broader SP500 could kick-off a powerful short squeeze.
Therefore, the Bias is Up for the SP500 in what remains a Bear Market Rally.
Recall, if what we expect to happen fails to occur, then the opposite move is often more reactionary.
All the best,