New Year, Same Market

As the end of the year approaches and people worldwide begin to reflect on the past and make resolutions for the future, it’s important to remember that the stock market is incapable of such introspection. There is no magic switch to be flipped or easy habit changes that can instantly turn the market’s direction around. Last year was rough for stocks, but it will take more than the passage of time to see a meaningful improvement. The market moves on its terms, and it will take a concerted effort and sustained positive momentum to bring about a turnaround.

As with New Year’s resolutions, lasting change requires addressing the root causes of a problem. In the case of the stock market, the underlying issues of inflation, interest rates, and negative gross domestic product remain unchanged despite the long holiday weekend. Unless these factors are addressed, the market will likely continue to exhibit the same patterns and challenges seen in 2022. 

To see real progress, tackling these fundamental issues and creating a foundation for positive growth will be necessary.

As the new year begins, some concerning trends from the past year appear to be carrying over. Key support levels continue to be tested, and tech stocks are lowering the market.

Opening bell brings market to strong level of resistance

In the pre-market session, the S&P 500 futures approached the psychological level of 3,900, which has been identified as a significant point of resistance. As expected, this critical level proved a formidable barrier, and the index fell back from 3,900 as it struggled to break through. 

As the opening bell signaled the start of the trading day, a surge of buying activity swept through the markets, led by names in the Dow Jones. However, it wasn’t long before the relative weakness of the Nasdaq became apparent, with certain underperforming stocks being heavily sold once again. These trends will be worth watching in the coming sessions as they provide insight into the market’s overall direction and strength.

Tech giants drag the market lower

As the S&P 500 futures approached the critical psychological level of 3,900, two heavily weighted names – Tesla Motor Company (TSLA) and Apple Inc. (AAPL) – helped to halt the market’s progress. These two influential stocks have the power to shape market sentiment and direction.

Tesla has been under heavy selling pressure lately, with the stock falling as much as 13% on Monday following a report that fourth-quarter vehicle production and delivery numbers would fall short of Wall Street estimates. As earnings approach, investors are increasingly concerned about production delays in China, Elon Musk’s active presence on Twitter, and the company’s overall performance. Tesla is now at risk of falling below the psychological level of $100, a fundamental support level that the company will need to defend to avoid a panic sell-off from investors.

Tech giant Apple has seen a steep decline, falling over 4% by mid-morning. The selling pressure has caused the company’s market capitalization to dip below $2 trillion. As one of the heaviest-weighted stocks on the Nasdaq, Apple’s performance has the potential to impact the overall market significantly. This trend is worth watching, as a report recently surfaced that the company has told suppliers to reduce the production of certain products due to a recent decrease in demand.

Massive move pending this range break

As it stands, the market has once again managed to hold above the critical support level of 3,800. However, if the index cannot maintain this level, look for Tesla and Apple to take the lead in lowering the market.

The area between the bordering levels of 3,900 and 3,800 has become a well-established zone of volatility. Eventually, one of these levels will break, leading to the next major move in the market.

Day one of 2023 closes negative

The Nasdaq and the S&P 500 were negative to close the session. The S&P 500 closed down 0.38%, losing 14 points, while the Nasdaq closed down 0.71%, declining 74 points. The Dow Jones futures followed, closing down 0.01%, dropping 3 points.