If Buyers Don't Step Up Soon, the Market Could Move Sideways for Weeks

The market appeared to love the Federal Reserve's 50 basis-point rate cut decision, at least initially. But the most major indexes and sector ETFs finished Wednesday in the red. That’s not a combination I viewed as highly likely, but it is also why I avoid big build-ups like Wednesday's FOMC announcement: emotion drives the day.

Thursday has become a more important watch point for me. After the initial fade, do we see the reversal? A push-through and close above Wednesday's intraday highs on a major index like the S&P 500 or Nasdaq creates a breakout on the chart.

The reversals in 20-year U.S. treasuries and gold look the most troubling. Both have enjoyed strong runs, but gold ended yesterday sitting on its 10-day exponential moving average (EMA), which has been a level of support over the past two months. The 21-day EMA is only another 1% lower, and bulls will need to step in as strong buyers there. Closing under both EMAs has created challenges for bold rallies.

Unfortunately, Wednesday's reverse put a damper on several recent breakouts on my radar. MongoDB MDB has closed red five days in a row. The total percentage of the move lower hasn’t been big on any single day, but the post-earning’s momentum appears to be gone. The chart isn’t broken; however, a trader must keep a tight leash on any long position.

MDB isn’t alone. Don’t get me wrong, the market doesn’t appear ready to dive hard or turn bearish, but if we don’t see buyers step into the market on Thursday or Friday and keep the momentum alive, we could see a few weeks of sideways movement.

One chart that stood out to me from this week’s action is PayPal PYPL. A close over $74 sets this up for a quick move into the $80s. If the market holds today, this is one to watch.

At the time of publication, Byrne had no positions in any securities mentioned.