U.S. stocks concluded a very volatile week with divergent performance, as strength in mega-cap technology shares counterbalanced broad-based weakness elsewhere. The S&P 500 $S&P 500(.SPX)$ finished -0.35% for the week, the Nasdaq Composite $NASDAQ(.IXIC)$ gained 0.3% for the week, and the Dow Jones Industrial Average $Dow Jones(.DJI)$ retreated 0.6%. Investor sentiment remains anchored in neutral territory, with the Fear & Greed Index reading 52.
The bearish move anticipated last week played out exactly as expected. The $NASDAQ 100(NDX)$ hit its 20-week moving average with a -2.3% move, the $Cboe Volatility Index(VIX)$ spiked as forecasted, and our thesis of an overcrowded trade with excessive participation was confirmed.
While the technical conditions already favored a pullback, the weekend’s news acted as a catalyst, accelerating the selloff with unexpected velocity. I typically post targets and extended targets meant for multi-day or multi-week moves; however, by Tuesday, those extended targets had already been met. The SPX even hit our “worst-case” weekly target of $6,787. (You can find all these layers in the S/R Levels edition published on Fridays, and in the charts of this Weekly Compass).
This overextended move triggered reversal alarms, by Tuesday afternoon when the market closed I sent a note to all subscribers highlighting the overextended move in the VIX and providing two numbers for Wednesday: $6,819 for SPX, and $610.1 for $Invesco QQQ(QQQ)$ ; if those two were recovered by Wednesday we would start seeing valid signs of a bullish reversal, and after them, $6,836.8 and $613 respectively. What happened next was a multi-day bounce that recovered the losses of Tuesday.
This is why it’s vital to have a professional perspective on technical indicators, it allows us to anticipate price direction and use well-modeled support and resistance levels to anticipate reversal zones and targets.
Unlike traditional analysis, my levels aren’t just based on historical lines; they are modeled for the period ahead (both weekly and monthly). Since this Substack launched in 2024, premium subscribers have witnessed the consistent accuracy of these levels firsthand. The ones for next week are out,
Gains in technology and consumer discretionary shares provided essential support on Friday. $Microsoft(MSFT)$ surged over 3% and $NVIDIA(NVDA)$ climbed 1.5%, offsetting persistent semiconductor weakness; $Intel(INTC)$ plunged roughly 17% on disappointing guidance. Financials proved the session’s biggest drag, falling 1.4% after Capital One slumped nearly 8% on an earnings miss.
Small and mid-cap stocks faced significant selling pressure. The Russell 2000 dropped 1.8% on Friday diverging from the S&P500 and the Nasdaq100, we will study the IWM as usual below in the premium section.
For SG users only, Welcome to open a CBA today and enjoy access to a trading limit of up to SGD 20,000 with unlimited trading on SG, HK, and US stocks, as well as ETFs.
🎉Cash Boost Account Now Supports 35,000+ Stocks & ETFs – Greater Flexibility Now
Find out more here.
Complete your first Cash Boost Account trade with a trade amount of ≥ SGD1000* to get SGD 688 stock vouchers*! The trade can be executed using any payment type available under the Cash Boost Account: Cash, CPF, SRS, or CDP.
Other helpful links:
-
💰Join the TB Contra Telegram Group to Get $10 Trading Vouchers Now🎉
-
How to open a CBA. How to link your CDP account. Other FAQs on CBA. Cash Boost Account Website.
Comments