Are the indexes realigning? As we enter a crucial earnings week, the potential for a market realignment presents opportunities and challenges for traders. This week’s earnings reports from influential companies like AMD, Apple, and Amazon will likely determine whether support holds in tech-heavy indexes and whether the rotation into cyclical and defensive sectors continues. As we navigate this pivotal week, keep a close eye on these key technical levels and patterns. The outcome of this meeting could set the tone for market expectations and economic outlooks in the coming months, potentially marking a significant inflection point in the current interest rate cycle.

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Over the past weeks, we maintained a +30 slightly bullish ranking on the overall market despite the consistent trend in the SPY. This was due to a divergence between the SPY and the sectors leading in technology and communications—quite frankly, compared to the rest of the market which has been showing choppy neutrality since Q1 earnings, as illustrated by the equal-weighted S&P 500 RSP. As long as this divergence was in place, we felt justified in maintaining a slightly bullish ranking.

However, this week marked a significant change. We observed early indications of a rotation from mega-cap stocks into the previously neglected indexes such as the Dow Jones and Russell 2000. While this shift hasn’t yet fully established a new trend, the initial momentum is substantial enough to warrant an upgrade in our market ranking to +25.

The SPY has recently achieved a significant milestone by breaking out above the crucial level of 550. Despite this promising development, Tackle Trading has decided to maintain a cautious yet slightly bullish ranking of 30. This decision stems from a careful evaluation of the breakout’s context—notably, its lack of broad-based market support and the ongoing divergence observed with the RSP.

This week’s market analysis highlights the crucial role of confirmation in our trading strategies. Despite some bullish signals, we’re seeing inconsistencies and a slowdown in momentum, which caution against overly aggressive actions without robust confirmatory signals. As we navigate through these mixed signals, it’s essential to maintain a vigilant approach, closely monitoring market indicators and behaviors. This vigilance will enable us to make smarter trading decisions and effectively manage risks.

Last week, we maintained the 30 handle for the S&P 500, indicating no significant upgrades or downgrades. This stability reflects the absence of notable technical changes in the market’s pattern and trend. To fully understand the current market dynamics, we need to delve deeper into the technical aspects of the S&P 500, including trends, patterns, support and resistance levels, and key indicators.