At the time of writing, S&P 500 futures are trading +1% at 5976, and the much-anticipated Nvidia earnings have come in strong—sending the stock up 4.5% after hours. The market’s trek toward all-time highs continues.
Welcome to the final free edition of Lines After Dark—a succinct, midweek update designed to bridge the gap between the longer Sunday letters. These notes focus on short-term setups and are written to be read in under three minutes.
To get the most out of this note, I recommend starting with the latest Sunday letter.
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Risk Off Criteria Check
As of Wednesday’s close, 1 of 3 risk-off signals is active: Momentum
Trend: The S&P 500 remains above its 20-day EMA and respected that level as support last Friday
Breadth: Closed positive
Momentum: Short-term momentum appears to have peaked; the fast oscillator has crossed below the slow, indicating a soft fade in strength
Risk can escalate if the index closes below 5785. In that scenario, the momentum signal likely stays negative, and the alarm would depend on whether breadth also breaks down.
Closes above 5950 would add confidence to the all-time high scenario.
To support these assessments, I’ve introduced a risk criteria histogram that tracks the status of Trend, Breadth, and Momentum. It displays a score of 0 to 3, depending on how many signals are active. You’ll find this histogram pane included in the Wednesday and Sunday notes going forward.
Small Cap Check: ARKK & IWM
ARKK holds above the key 52 level
IWM remains above 205, though it has lagged recently. A move above 212 would add confirmation to the broader bullish case
Key Levels in Focus: 6000, 5950 and 5785
This week’s levels have been slightly revised:
5950: This marks 5% above the 200-day EMA. My analysis shows that once price consistently holds above this level, the path to new all-time highs becomes the most probable scenario. At the time of writing, S&P 500 futures are trading above this level.
5785: Aligned with the short-term moving average, this level remains one of the three risk-off criteria. A breakdown here—alongside deterioration in momentum and breadth—would trigger a risk-off alarm. For now, the momentum slowdown is expected and healthy, given the sharp rally from late April through May.
6000: Marked as near-term resistance. If the bullish momentum continues, this is the next key level to watch on the upside.
The “shopping zone” for the index remains near the 20-day EMA (~5767/5785), which also aligns with the late September all-time highs—a meaningful area of confluence support that I continue to view as a buying opportunity on any pullback.
Summary
The primary outlook remains a constructive advance toward all-time highs, as long as the three risk-off criteria do not trigger a formal alarm.
I’ve established an initial long position in the S&P 500 and intend to buy dips as long as the risk-off criteria remain do not trigger an alarm.
As outlined in the Sunday letter, I’ve also begun accumulating exposure to ARKK, focusing on entries near the 50-day moving average or any retest of the 52 zone.
Disclaimer: The information in this article is for informational purposes only and should not be considered financial advice or a recommendation for any investment. I am not a financial advisor, and the content is not intended to serve as financial advice. It is solely intended to journal thought, ignite more thought and discussion.