Bulls Clear Downtrend Channels

by Knowledge Resources | 04/27/2025, 22:47

The next waves of resistance for the major indexes are at the 50-day moving averages and ahead of the height of the first-quarter earnings season that comes into focus this week.
The blue-chips lagged and are struggling to breakout of their downtrend channel and key resistance. This will be the first trouble spot to watch over the near-term and one the bulls likely need to resolve to keep momentum going.
May has been known as a historically bearish month and why the old adage of “sell in May and go away” is often talked about. However, the month has shown bullish action in recent years, including last year, after the major indexes rebounded off a short-term selloff.

The stock market showed strength for the fourth-straight session and a streak last reached in January as Friday’s gains wrapped up a solid week for the bulls. The next waves of resistance for the major indexes are at the 50-day moving averages and ahead of the height of the first-quarter earnings season that comes into focus this week.

The Nasdaq closed at 17,383 (+1.3%) with the peak reaching 17,404. Key resistance at 17,500 held. Support is at 17,000.

The S&P 500 traded up to 5,528 while settling at 5,525 (+0.7%). Key resistance at 5,500 was reclaimed. Support is at 5,450.

The Dow ended at 40,113 (+0.1%) after hitting a high of 40,137. Resistance at 40,500 held. Support is at 39,500.

Earnings and Economic News

Before the open: Bank United (BKU), Domino’s Pizza (DPZ), MGM Resorts (MGM)

After the close: F5 Networks (FFIV), Nucor (NUE). Rambus (RMBS), Welltower (WELL)

Economic News

None

Technical Outlook and Market Thoughts

For the week, the S&P 500 jumped 4.6%; the Dow rallied 2.5%; and the Nasdaq surged 6.7%. The blue-chips lagged and are struggling to breakout of their downtrend channel and key resistance. This will be the first trouble spot to watch over the near-term and one the bulls likely need to resolve to keep momentum going.

The Dow’s high last week was at 40,376 with key resistance at 40,500 holding since the April 4th close below this level. This has kept an 11% trading range in play with more important hurdles at 41,500 and the 50-day moving average. An adjusted uptrend shows a possible breakout on multiple closes above 41,000.

Support is at 39,500 with a close below 39,000 being a slightly bearish development.

The Russell 2000 was up less than a point on Friday with the high at 1,957. Key resistance at 1,950 was cleared but held for the third-straight session. Closes above this level keeps more important hurdles at 2,000-2,025 and the 50-day moving average in focus.

Fresh support is at 1,925-1,900. A close below the latter and the back into the downtrend channel would indicate weakness to 1,875-1,850.

The Nasdaq cleared 16,750 midweek and a level that held following higher highs into the weekend. The next layers of resistance are at 17,500-17,750 and the 50-day moving average. If cleared, a possible near-term bottom could be in place.

Rising support is at 17,250-17,000. A move back below 16,750 would suggest a false breakout.

The S&P made a nice pop and close above key resistance at 5,500. The high on the April 3rd close below this level was at 5,499 and something we highlighted on the chart to show the importance of Friday’s price action. If 5,500 holds, there is breakout potential to 5,650-5,700 and the 50-day moving average.

Support is at 5,450-5,400 with the latter representing the top of the downtrend channel. A move back below 5,300 would be a red flag for the index.

The Volatility Index (VIX) fell below multiple layers of support at 30 on Wednesday and 27.50 on Thursday. Friday’s low on the close was at 24.84. We have been mentioning closes below 24 would be a very bullish development for the market and possible suggest the start of a near-term bottoming process for the major indexes. Historically, the VIX trades near 20 and a level that we would like to see recovered by month-end.

New resistance is at 27.50-30 with wiggle room up to 35. The latter held during the previous six-session trading range and will be an excellent clue on when to get extremely bearish on the market again. For now, current levels are giving a neutral reading heading into the height of the first-quarter earnings season.

May has been known as a historically bearish month and why the old adage of “sell in May and go away” is often talked about. However, the month has shown bullish action in recent years, including last year, after the major indexes rebounded off a short-term selloff.

Airbnb (ABNB), Apple (AAPL) and Amazon.com (AMZN) will announce earnings after Thursday’s close. Mastercard (MA) and McDonald’s (MCD) will report ahead of Thursday’s open. Other highlights include First Solar (FSLR), Starbucks (SBUX), Snap (SNAP), Sofi (SOFI) and Visa (V) on Tuesday. Caterpillar (CAT), Microsoft (MSFT) and Meta Platforms (META) will brief Wall Street on Wednesday.