Breaking Point: The Stock Market Drops Again – What Now

In the early hours of today’s trading session, the stock market was impacted by the release of the weekly jobless claims report, which came out at 8:30 a.m. Eastern. The report showed that the number of jobless claims was higher than expected, indicating a slight setback in the labor market. While the median forecast for jobless claims was 195,000, the actual figure rose to 211,000, making it the largest increase since Christmas.

According to sources, the rise in jobless claims was primarily due to tech layoffs in New York and California, as well as the conclusion of winter contract work. However, layoffs across the rest of the United States appear to be low.

The S&P 500 futures reacted to the jobless claims report, surging by 25 points before the market opened. This data suggests that traders are closely monitoring the labor market, as any fluctuations in employment rates could significantly impact the stock market.

Bull Trap Set, Bears Take Control

As the opening bell rang, traders observed that the S&P 500 futures had reached a resistance level formed by the 50-day Simple Moving Average (SMA). This level had proven to be significant in previous trading sessions, but a brief surge allowed the market to set up a bear trap before the bears took over. After creating lower highs, the S&P 500 futures slipped below resistance, signaling a potentially significant move to the downside.

Recent price action had foreshadowed today’s downturn. Over the past few sessions, several negative catalysts have emerged in the market, with the potential to impact macro moves. The most significant bearish catalyst was Federal Reserve (Fed) Chairman Jerome Powell’s recent statement that rates will be “higher for longer.” This caused the market to price in a 50-basis point rate hike at the next meeting.

Resistance levels created by key moving averages quickly began to be used as barriers. Every time the market attempted to climb higher in the past few trading sessions, a moving average pushed it back down, and today was no exception. Ultimately, the market broke the 4,000 level and continued to decline steadily throughout the day, with indexes closing nearly 2% down.

This downturn has shown that traders are closely monitoring the market’s movements, with key resistance levels and moving averages being closely watched.

Big Move Lower Was No Surprise

As previously discussed in a Simpler News article, the market faced the challenge of breaking through a resistance zone, and even if it managed to do so, it needed to hold that zone to confirm its validity. Otherwise, the market would likely move towards the Point of Control at 3,950.

Today, the market played out just as predicted, with a gradual build-up of negative sentiment leading to a significant downturn. Over the past few trading sessions, there had been a controlled and systematic movement in the market, paving the way for this big move. However, market makers made it challenging by causing violent price pops, which created fear of a move higher.

The market’s behavior highlights the importance of confirming the validity of resistance zones and the potential consequences of failing to do so. Traders will closely watch the market’s next move to determine whether this downturn is temporary or the beginning of a more prolonged decline.

Levels to Be Aware of Moving Forward

As the market faces a significant downturn, traders are now evaluating the potential support and resistance levels. Currently, the market is above the 200, 50, and 15-day Simple Moving Averages (SMA), as well as the 21-day Exponential Moving Average (EMA). These levels could provide good targets for the market to aim for if it does manage to turn around. However, it will require significant effort to rise above them.

On the downside, traders are looking at the psychological level of 3,900 as a potential support level. If the market fails to hold this level, the critical support level is at 3,895, which is where the 2023 trading year began. If the year continues to be negative, traders will be closely watching the yearly low for 2023 at 3,814.5 as a potential support level.

As traders continue to assess the market’s movements, they will be keeping a close eye on these key levels to determine the market’s next move. The potential for further downside moves will depend on whether the market can hold these critical support levels or break below them.

Selling Heats Up

At the close of the trading session, both the Nasdaq and the S&P 500 showed negative results. The S&P 500 futures closed down by 1.99%, losing a total of 79 points, while the Nasdaq futures closed down by 1.92%, declining 235 points. The Dow Jones futures followed suit, closing down by 1.80%, losing 591 points.