Slightly negative trading during the overnight session turned into a volatile day for Wall Street.

The S&P 500 futures and Nasdaq futures weren’t drastically affected by negative momentum of  the previous day at the open. However, such a dramatic move the previous session fueled exhaustion from both sides of the market into Tuesday. 

At the open both the Nasdaq and the S&P 500 quickly showed early signs of hope for the bulls as the market started to trade higher. The Nasdaq was noticeably stronger than the S&P 500 and helped lead the short-lived charge to the upside. Higher progress was minimal and quickly brought back down by the bears. As the Nasdaq started to lose momentum the S&P also headed lower.

In the middle of a push downward by the bears, economic data from the U.S. Purchasing Managers Index (PMI) was released. The PMI measures the prevailing direction of economic trends in manufacturing. The data provided a positive reaction that gave the market life. This news was enough momentum to carry the market to new highs in both the S&P 500 and the Nasdaq.

News stirs market reaction

Momentum stirred by the reaction from the news was strong enough to get the market back to its daily “mean,” or the 21-day exponential moving average. This level was mentioned in the previous Simpler Insights daily recap. This level is significant as the market failed to get above this mark on a few occasions. This can typically be a sign of weakness and struggle. The opposite can be true if that level acts as support.

Once the market reached the mean, a battle broke out between bulls versus bears. At this level the bulls lost the battle and the bears regained control. Selling pressure from the bears at this point was fairly strong and consistent.

On the way down, the Nasdaq was not as weak and was falling with less strength. This theme was established earlier in the day and ultimately carried over throughout the remainder of the day and into the close.

Before settling into a tight range for the remainder of the day, the S&P 500 made new lows on the day while the Nasdaq failed in this area. This was yet another sign of the S&P 500 being weaker than the Nasdaq. For the remainder of the session the market was bouncing back and forth between support set by the bulls and the resistance set by the bears. This led to price action being “choppy,” or non-directional. 

Even in the last hour of the market the chop continued. This is not ideal for many trading strategies, but can be very favorable for others.

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At the close both the Nasdaq and the S&P 500 futures were negative. The S&P 500 futures closed down .28%, losing 12 points, while the Nasdaq futures closed down .12%, a loss of 16.25 points.