The stock market showed strength on Friday following comments from the White House that President Trump is optimistic China will seek a deal. The news came after China retaliated by raising its tariff rate on US products to 125% from 84%. Goods from China will see a rate of 145%. Meanwhile, JPMorgan (JPM) announced better-than-expected numbers to start the first-quarter earnings season and provided a much needed lift to the financial sector.
The Nasdaq closed at 16,724 (+2.1%) with the high hitting 16,753. Resistance at 16,750 was cleared but held. Support is at 16,250.
The S&P 500 reached a peak of 5,381 before ending at 5,363 (+1.8%). Resistance at 5,400 held. Support is at 5,200.
The Dow went out at 40,212 (+1.6%) after tagging a high of 40,404. Resistance at 40,500 held. Support is at 39,000.
Earnings and Economic News
Before the open: AstroNova (ALOT), Goldman Sachs (GS), M&T Bank (MTB)
After the close: Applied Digital (APLD), FB Financial (FBK), Health In Tech (HIT)
Economic News
None
Technical Outlook and Market Thoughts
The major indexes traded in tighter ranges on Thursday and Friday with key resistance levels that were stretched on Wednesday holding. The prior Thursday’s start of a three-day selling spree has established trading ranges of 10%-11% that highlight support, as well.
Trading ranges ahead of quarterly earnings aren’t surprising as Wall Street awaits the results that could help spur bullish or bearish momentum. However, a range of double-digits is rare for any time frame, let alone earnings season. This event takes place four times a year and typically when stocks make their biggest moves.
The bulls needed to see some follow thru following the 12% surge in the Nasdaq on Wednesday but that action didn’t happen. We mentioned the technical outlook remained bearish on Thursday morning as death-crosses remain in play for the major indexes. The Russell already warned savvy traders in mid-March lower lows were coming and something we were well prepared for.
The action also showed us clear downtrend channels we can use to watch for lower lows, or when a bottom could occur. The resistance levels are at, or near, the top, of the downtrend channels so this will be helpful clues on keeping us one-step ahead of the action.
The Russell 2000 closed at 1,860 and the session high with key resistance at 1,900 holding. Wednesday’s close above this level teased a possible 5% surge to 2,000 but several layers of resistance at 2,075-2,100 and the 50-day moving average remain afterwards.
Key support is at 1,725. A close below this level likely gets the November 2023 lows at 1,633 and 1,635 in the picture. This area would represent a 34% spanking from the all-time high of 2,466 from last November.
The Nasdaq failed to hold and recover 16,750 to close out the week with additional hurdles at 17,000-17,250. A pop above 17,500 and the top of the downtrend channel might suggest a near-term bottom with more intense resistance at 18,000-18,500 and a freshly formed death-cross from last week.
Shaky support is at 16,000-15,750. A move below the latter would indicate a retest to 14,800 with last Monday’s low at 14,784.
The S&P made a higher high on Friday but struggled at clearing 5,400. Continued closes above 5,500 and out of the current downtrend channel would be a slightly bullish development as there is gap up potential to 5,700. However, the 50-day moving average is just over six points away from falling below the 200-day moving average to form a dearth-cross.
Support is at 5,100 with stretch down to 5,000. A close below the latter would reopen downside pressure to 4,900-4,800 with last Monday’s low at 4,835.
The Dow fell just shy of reclaiming 40,500 and the top of the downtrend channel following Wednesday’s close above this level. There is upside to 42,000 if cleared and held for multiple sessions but the 50-day moving average is less than 1% away from sliding under the 200-day moving average.
Support is at 40,000 followed 38,500. Closes below the latter would imply another round of weakness towards 37,000-36,500 with last Monday’s low at 36,611.
The Volatility Index (VIX) has also established a trading range from 30 to 60 following the prior Thursday’s close at 30.02. On March 14th, we noted a close above 30 would be a blood in the streets moment. The VIX surged 50% the following session to close above 45 with last Monday’s peak at 60.13. We have noted a move above 65 and the August 5th peak at 65.73 could get 85 and the November 2023 highs in focus. This is also where we also predict a capitulation moment might occur.
Same deal as last week as far as support. Closes back below 30 on the VIX would be slightly bullish. However, the bulls likely need multiple closes below 24-20 before a near-term bottom can be confirmed for the market.
There could be trade deals announced as early as this week as a number of high ranking officials from across the pond and around the globe are expected to meet at the White House. The biggest wild card remains China and the one country that will help a massive rebound rally, or a drop to fresh 52-week lows.
The market will be closed this Friday and the regular monthly April options will expire Thursday. The financial stocks will be ones to watch this week as the first-quarter earnings season will start to get going.
