8:00am (EST)
Wall Street wrapped up a nasty week with the bulls getting a rebound win on Friday after holding key support levels. The major indexes were also in oversold territory and typically where there is some buying. However, the technical damage from the weekly losses still portrays near-term market weakness.
The Nasdaq traded up to 18,861 before settling at 18,847 (+1.6%). Fresh resistance at 18,850 was topped but held. Support is at 18,350 and the 200-day moving average.
The S&P 500 closed at 5,954 (+1.6%) with the high hitting 5,959. New resistance at 5,950 was cleared and held. Support is at 5,850.
The Dow made a push to 43,873 while finishing at 43,840 (+1.4%). Current resistance at 43,750 was topped and held. Support is at 43,250.
Earnings and Economic News
Before the open: Avadel Pharmaceuticals (AVDL), Hut 8 Mining (HUT), Plug Power (PLUG)
After the close: ADMA Biologics (ADMA), Dave (DAVE), GigaCloud Technology (GCT)
Economic News
PMI Services Index – 9:45am
Construction Spending – 10:00am
ISM Manufacturing Index – 10:00am
Technical Outlook and Market Thoughts
The Nasdaq led February’s pullback after sinking nearly 4% but much of that was from last week’s 3.5% drubbing. The S&P 500 was down roughly 1% for the week and 1.4% in February. The Dow was up about 1% in the week but gave back 1.6% last month.
We talked about last Tuesday’s technical breakdown and RSI (relative strength index) levels for the major indexes. The near-term targets we listed on the charts quickly came into play on Thursday with the Nasdaq closing below a key level of support.
The S&P and Russell held their backup support levels on Thursday and again on Friday after falling below them. The Dow fell out of its uptrend channel and made a lower low on Thursday before cracking a key level of support on Friday and holding.
As for the RSI levels, we started highlighting them last Tuesday when the Dow’s RSI was at 42 and the S&P’s RSI was at 41. They closed Friday at 48 and 44, respectively, after bottoming at 40 and 35 on Thursday.
Also last Tuesday, the Nasdaq’s RSI was at 36 and the Russell’s RSI at 32. They were last seen at 38 and 34, respectively, after both bottomed at 30 on Thursday.
We always track RSI levels and mention oversold conditions at 30 and below and overbought conditions at 70 and above. While the bears may have failed in pushing RSI levels to the mid to high 20’s, they could come back into play if Friday’s action was just a dead cat bounce.
The S&P tagged an intraday low of 5,837 on Friday which represented a 5% pullback off the February 19th record peak of 6,147. Key support at 5,850 was tripped but held for the second-straight day. The previous dip buying came in mid-January off the prior all-time high just below 6,100 on December 6th and also represented a 5% selloff. Seven trading sessions later all-time highs were made again.
Key resistance is now at 6,000 and a down trending 50-day moving average. Continued closes above these levels and back above the bottom of the uptrend channel would be a slightly bullish signal. A move above 6,050 and the middle of the prior uptrend channel might imply a near-term bottom.
The Nasdaq fell through several layers of support on Thursday’s 2.8% spanking and came within 14 points of breaching its 200-day moving average at 18,358. Key support at 18,600 failed to hold but was recovered on Friday. The low at 18,372 represented a 9% selloff from the December lifetime top at 20,204.
There are several layers of resistance starting at 19,000 and then 19,250. Continued closes above the latter would get 19,500-19,750 and a down trending 50-day moving average back in focus.
The Dow held key support at 43,250 throughout last week and recovered its uptrend channel and the 50-day moving average on Friday. After a slight adjustment, this level now represents the bottom of the uptrend channel. There is still risk down to 42,500-42,000 on multiple closes below 43,250.
Resistance is at 44,000. Continued closes above this level would imply another run towards 44,500-45,000.
The Russell 2000 was down 1% for the week and 5% in February after ending at 2,163 on Friday. We have been talking about near-term risk down to 2,135 with the low at 2,126. This level was prior resistance before the September 12th breakout. A drop below 2,125 likely gets 2,000 in focus with the August 5th low at 1,993.
Resistance is at 2,175 followed by 2,200 and the 200-day moving average. The 50-day moving average remains on track to fall below 200-day moving average and form a death-cross. This is a bearish signal for lower lows down the road.
The Volatility Index (VIX) closed above 20 for the first time this year on Thursday with the peak reaching 21.47. We have talked about stretch up to 22-24 on closes above 20 with Friday’s peak at 22.40. A pop above 24 likely leads to some panic selling in the market with risk to 28-30.
Key support remains at 17.50 following the prior Friday’s close above this level. In mid-February, we pointed out the golden cross in process on the VIX. This is when the 50-day moving average clears the 200-day moving average and typically leads to higher highs.
A higher VIX is bearish for the market and this technical setup once again is playing out in spades. We always talk about following the VIX to get early clues on upcoming market direction and it really does pay to do the homework.
We often say one day certainly doesn’t make a trend but the higher Friday closes across the board was the first in five weeks. A down Monday would still suggest ongoing weakness and heightened volatility while an up Monday could signal money is possibly moving off the sidelines to start nibbling.
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