Simpler’s traders are critically reviewing key levels in the indices for definitive indication of where this market is headed.

The stock market took a big hit to start the week and rattle traders.

(Check out the video, above, for insight into targeted trading in this volatile market.)

More selling doesn’t reveal market floor

Heavy selling saw the Dow close at 32,817.38 points to fall 2.37% (dropping 797.42 points on the day). The Nasdaq fell even harder, dropping to 12,830.96 points for a 3.62% tumble while the S&P 500 crumbled 2.95% to 4,201.09 points.

Simpler’s traders are watching economic news domestically and world news to determine how the market responds. This environment – with all the selling and uncertainty – hasn’t revealed a market floor. Market sectors have been blanketed in red and traders are leaning into technical analysis of the charts during these selloffs.

Market sentiment appears to be heavily wary of Russia’s invasion of Ukraine and its effects on world economies. Traders are watching just how far the market will test lows, and constantly revisiting the charts to determine if prices will rally.

If the S&P 500 can move higher, it could set up for a potential short – and that might be the best opportunity of the year to have a short before the market revisits 4100 in the index. 

Watch liquidity, adjust time frames

Why are lower levels important? As the S&P 500 zooms out to the weekly time frame, traders get a larger view to determine remaining liquidity. There may be setups with opportunity in anticipation of price drops below expectations.

The market has changed personality this year. Not only is this market in chop, but traders are considering that a bear market could last even into the summer.

During mid-2021, when the market appeared “on track,” a basic chart saw the market making lower lows and lower highs. Traders could wait for the market to push higher to short it at the right time.

Many issues influence market action

Market environment today is difficult to read.

The potential for shorts could come into play in the Nasdaq if the levels get below 12,000. High inflation combined with high unemployment and supply problems have the Nasdaq looking to become even worse than this. 

It’s possible the Nasdaq, now clearly in bear territory, could revisit the consolidation of October 2020. This also means the Nasdaq is eliminating progress of 2021 quickly.

The S&P 500 is in a precarious position – now to the downside below key moving averages. Last week saw the S&P 500 reach its worst close since October 2020 – and almost that level again today.

Traders are revisiting the reversion to the mean on the hourly and the daily S&P 500 with an eye for any indications for an opportunistic short forming.