Markets Catch Breath After Heavy Selling

Bears have full control over the market, as seven of the last eight trading sessions have been negative. It’s beginning to look like the market is pricing in many of the negative economic reports now and perhaps ones to come. Between profit-taking, economic events, and Fed speak, the market has run into a rough patch and has fallen roughly 4%. Today the selling pressure continued but has slowed down after an aggressive start to the week. This recent lower move has put the market in a vulnerable spot ahead of next week. 

When the opened bell sounded, there were early signs of hope to the upside. Some leading names, such as Nvidia (NVDA), Amazon (AMZN), and Netflix (NFLX), started off strong. These tech titans helped the Nasdaq to rally at the open. The Dow Jones, however, struggled to see the same push, causing a divergence between the indices. It’s important to note that when there is a divergence between indices, one of two things will happen: the momentum of one index will push or pull the others in the same direction, or they maintain a divergence, consolidate, and cause indices like the S&P 500 to chop or trade sideways. 

After a modest push higher, the S&P 500 futures reached an area of heavy overhead resistance at 3,964. The significance of the level is that it is the daily “mean” or the 21-day exponential moving average (EMA). This level on the chart is the new line in the sand as the end of the week approaches. Overall, the market will be vulnerable as it remains below the mean and faces headwinds from overhead resistance.

Throughout the rest of the trading session, the market fluctuated between 3,925 and 3,965. Volatile price action left the indices to chop around in a 40-point range. It is common to have a day of indecision and capitulation after a strong move the previous two days as the market catches its breath.

Stocks to watch closely

As we head into the second half of the week, the three names that led the opening charge can be used to gauge market sentiment. Respectively, NVDA, AMZN, and NFLX were relatively strong in relation to the overall market movement today. What you can look for in the coming sessions to gain an edge on the market is to see how these names move. If the three names start to sell off, the Nasdaq can break the range set today and pull the markets down lower. If these names continue to hold firm and rally, this can indicate big money is rotating into tech as the market goes sideways. The technology sector has been notorious for leading rallies. 

Economic data reporting tomorrow

Tomorrow, more economic data will push the market in either direction. Depending on what the numbers look like and how they are digested by market participants and big money on Wall Street, we may see more volatility.

The initial and continuing jobless claims will be announced tomorrow at 8:30 a.m. Eastern. Initial jobless claims have a forecast of 230,000. Wall Street will be looking to see if these numbers help support the Federal Reserve’s (Fed) decision to potentially lower rates next week. If these numbers do not reflect a growing economy, the anticipation of further rate hikes will be priced into the market.

Market closes slightly negative

The Nasdaq and the S&P 500 were negative to close the session. The S&P 500 closed down 0.19%, losing 7 points, while the Nasdaq closed down 0.48%, a loss of 53 points. The Dow Jones followed, closing down 0.02%, declining 5 points.

Interested in learning how our professional traders navigate these volatile markets? Take advantage of the Simpler Trading Austin Mentorship streaming live starting this weekend. Take advantage of this interactive, live-trading experience!