TAKEAWAYS
- The Nasdaq Composite is trading above its last swing high, which could a the first sign of a reversal to the upside
- The S&P 500 is up against resistance from its 50-day moving average and a downward sloping trendline
- The Dow Jones Industrial Average has reversed from a support level and is above its 50-day moving average
A tug-of-war with no clear winner—that's what the stock market seemed to be playing this week. With a Fed meeting, key economic data, and more earnings on top, will a winner emerge next week?
It was an interesting week in the stock market. Economic data shows that growth is slowing, while inflation isn't showing signs of slowing down. This possible "stagflation" scenario paves a path towards more uncertainty, especially when it comes to interest rates. And with next week's Fed meeting, investors are becoming even more cautious about making any trading or investing decisions.
Looking back at last week, we can see how Tesla (TSLA) bounced higher after it missed earnings. Meta Platforms (META) beat earnings estimates, but its stock price gapped lower on weak Q2 guidance. That was a concern, since META has been enjoying a bullish rally since the end of 2022. It remains to be seen if the gap up in META's stock price on February 2, 2024 will get filled. The stock is trading at its 100-day simple moving average (SMA), which could be a support level the stock bounces from; however, META could also end up breaking below it and sliding further.
Investors were concerned by META's weak guidance, as they were looking for Tech earnings to be the catalyst that pushes the market higher. After META took most of the market lower, the next worry was whether the other Tech stocks would follow the same path. Fortunately, that didn't occur. Microsoft (MSFT), Alphabet (GOOGL), and Snap (SNAP) all beat earnings, and their stock prices moved higher, reversing the downtrend.
Is this Reversal Sustainable?
The positive earnings excited the bulls, but it felt like they hit a wall. There wasn't enough follow-through to push the stock market indexes higher, and the bears didn't seem to be interested in putting up much of a fight.
While the S&P 500 ($SPX), Dow Jones Industrial Average ($INDU), and Nasdaq Composite ($COMPQ) traded higher on Friday, the weekly chart shows the S&P 500 and Nasdaq didn't close above last week's high. The Dow did close slightly higher, though.
Follow the live chart here.
The daily charts are more attractive. Below is the daily chart of the Nasdaq Composite, which shows that, after last Friday's low, the index moved higher, then fell on Thursday before recovering those losses at the close of the trading day. Today (Friday, April 26), the Nasdaq gapped higher and closed above Wednesday's swing high.
CHART 1. DAILY CHART OF NASDAQ COMPOSITE. After closing higher than the last swing high, there's hope the Nasdaq could rally higher depending on what unfolds next week. Chart source: StockCharts.com. For educational purposes.
The Nasdaq Composite is getting close to its 50-day SMA, which would be a strong resistance level for the index.
Follow the live chart here.
Moving on to the S&P 500, the index is up against resistance from its 50-day SMA, which coincides with a downward-sloping trendline.
CHART 2. DAILY CHART OF S&P 500 INDEX. If the S&P 500 breaks above the downward sloping trending on the top of the channel and its 50-day moving average, there could be upside follow-through. Chart source: StockCharts.com. For educational purposes.
Follow the live chart here.
The Dow is the most bullish of the three broad indexes. It has seen a clear reversal from a support level (red dashed line), and any bullish news next week will likely move the index higher.
CHART 3. DAILY CHART OF THE DOW JONES INDUSTRIAL AVERAGE. A clear bounce from a significant support level could mean the Dow has more buying than selling pressure. Chart source: StockCharts.com.
Which Way Will the Stock Market Move?
It looks like the bulls are hungry to be the more dominant player. If any news blocks the bulls from taking this market any higher, the bears will be quick to take over. Remember, the market takes the stairs up and the elevator down. The market will probably continue to see some choppiness until Wednesday afternoon, when the Fed makes its interest rate decision. That will probably be what will take the stock market down or up.
End-of-Week Wrap-Up
- S&P 500 closes up 1.02% at 5,099.96, Dow Jones Industrial Average closes up 0.4% at 38,239.66; Nasdaq Composite closes up 2.03% at 15,927.90
- $VIX down 2.28% at 15.02
- Best performing sector for the week: Technology
- Worst performing sector for the week: Materials
- Top 5 Large Cap SCTR stocks: Super Micro Computer, Inc. (SMCI); Coinbase Global Inc. (COIN); Vertiv Holdings (VRT); MicroStrategy Inc. (MSTR); Vistra Energy Corp. (VST)
On the Radar Next Week
- April ISM Manufacturing PMI
- Fed interest rate decision
- Fed Chairman Powell's Press Conference
- March JOLTS Job Openings report
- April Non Farm Payrolls (Jobs) Report
- April ISM Services
- Earnings season continues with Amazon (AMZN), Advanced Micro Devices (AMD), Eli Lilly (LLY), Barrick Gold (GOLD) and Booking Holdings (BKNG) reporting.
Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.
Happy charting!
