8:00am (EST)
The market was higher on Wednesday as tariff talk and an escalating trade war once again dominated the headlines. The major indexes were on track for a third-straight day of losses but rebounded intraday after the President gave a one-month auto tariff exemption to Mexico and Canada.
The Nasdaq made a run to 18,604 before finishing at 18,552 (+1.5%). Fresh resistance at 18,600 was topped but held. Support is at 18,400 and the 200-day moving average.
The S&P 500 closed at 5,842 (+1.1%) with the high hitting 5,860. New resistance at 5,850 was cleared but held. Support is at 5,750.
The Dow traded up to 43,135 while finishing at 43,006 (+1.1%). Current resistance at 43,250 was challenged and held. Support is at 42,500.
Earnings and Economic News
Before the open: BJ’s Wholesale (BJ), Cracker Barrel (CBRL), Kroger (KR), Macy’s (M)
After the close: Broadcom (AVGO), Costco (COST), Gap (GAP), Serve Robotics (SERV)
Economic news:
Initial Jobless Claims – 8:30am
Wholesale Trade Sales – 10:00am
Technical Outlook and Market Thoughts
Last Friday’s market gains proved to be a “dead cat” bounce as the major indexes made lower lows to start the week. It remains to be seen if Wednesday’s slight rebound will also be faded but the fact near-term resistance, and prior support levels, held is typically an ongoing bearish signal.
Additionally, there are now several layers of resistance levels for the major indexes that need to be cleared before we can say a near-term bottom has formed. The technical setups with the 50-day and 200-day moving averages are also bearish. There is some good news, however, as the action in volatility has been somewhat bullish after holding key resistance with signs of the 50-day moving average rolling over.
The Nasdaq was down 11% from its December 16th all-time high at 20,204 on the Tuesday low to 17,956. Key support from early October at 18,000 was tripped but held. Closes below this level would suggest downside risk to 17,500 and support from mid-September.
Resistance is at 18,600 followed by 19,000. After that, additional hurdles are 19,250-19,500 and the 50-day moving average.
The S&P kissed an intraday low of 5,732 on Tuesday which represented a 7% drop from the February 19th record peak of 6,147. Key support from early November at 5,700 and the 200-day moving average held and again on Wednesday. A move below the former would indicate weakness towards 5,650-5,600 and support from mid-September.
Key resistance is now at 5,850 followed by 5,900-5,950. A close above 6,000 and the 50-day moving average would be more bullish signals of a near-term bottom.
The Dow has been holding key support at 42,500 over the past two sessions and remains trapped below its uptrend channel. There is downside risk to 42,000 on a close below this level.
Lowered resistance is at 43,250. Continued closes above 43,500 and the 50-day moving average would be a more bullish setup of a possible bottom.
The Russell 2000 was down 17% from its all-time record high of 2,466 on the drop to 2,048 on Tuesday. Key support from mid-September at 2,075 held, and again on Wednesday. Multiple closes below this level would likely confirm redness to 2,000 with the August 5th low at 1,993.
Resistance is at 2,135 followed by 2,175-2,200 and the 200-day moving average.
The Volatility Index (VIX) has been holding 24 all week despite stretches above this level. Tuesday’s peak hit 25.35 with the close at 23.51. We mentioned closes above 24 likely leads to panic selling in the market with risk to 28-30.
New support is at 22.50-20. A near-term close below at 17.50 and the 50-day moving average would be slightly bullish for the market. We circled the 17.50 area to show how the 50-day moving average has suddenly rolled over.
Follow thru and continued closes above near-term resistance levels into Friday’s close would be a small start for the bulls. Of course, Monday would also need to be higher to confirm some buying could be coming into the market while the VIX likely needs to get below 20.
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