Pop Quiz, Hotshot

We have a few big tests in progress on the indices here, with the small caps (IWM daily chart, first below) and the Nasdaq-100 ETF (QQQ daily chart, second below) testing their 200 and 50-day moving averages, respectively, from the underside, meaning price had broken below those reference points and is now bouncing up to test them.

These are fairly significant moving averages to test, particularly as we embark on the meat of this earnings season with mega cap tech set to report in the coming weeks. This evening, for example, we will hear from META TSLA and LRCX. And next week will only be busier with earnings in addition to the FOMC one week from today. 

While we have not yet seen any firm rejection at the moving averages just yet, the key will be these general areas into next week. Do we see, for example, a head-fake higher and reversal lower after the FOMC? That is one possibility, particularly given how cocksure bulls seem to be that another AI-led melt-up is underway into the end of year seasonality. 

Also note that oil and rates are cooling off in about a benign manner as possible up here, with neither yet violently rolling over in such a way many have been betting. I still think the pain trade for both is higher, which should be another headwind into the holidays.