Small-Caps Slack After Weekly Pullback
The stock market tagged intraday record highs again on Friday while settling mostly higher on the session. The blue chips lagged while the small-caps were down for the week as volatility remained subdued heading into the final few weeks of the year.
The Nasdaq closed at 19,859 (+0.8%) after tagging a record high of 19,863. New and lower resistance at 19,850-20,000 was cleared and held. Rising support is at 19,750-19,600.
The S&P 500 traded up to an all-time top of 6,099 while ending at 6,090 (+0.3%). Key resistance at 6,100 was challenged and held by 0.03 of a point. Support is at 6,050-6,000.
The Dow went out at 44,642 (-0.3%) with the low tapping 44,596. Upper support at 44,750-44,500 failed to hold. Resistance is at 45,000 with last Wednesday’s lifetime peak at 45,076.
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Technical Outlook and Market Thoughts
The major indexes easily remained in their current uptrend channels while making higher highs throughout the week. The one index that slacked were the small-caps as the Russell was down about 1% for the week. This wasn’t too surprising as the index outpaced the other major indexes over the prior two weeks.
Shaky but key support at 2,400 failed to hold on Thursday’s fade to 2,395 and close at 2,396. Friday’s close back above this level keeps 2,450-2,500 and the November 25th all-time high at 2,466 in play. The 2,500 level represents our 25% higher Price Target from February 23rd when the Russell was at 2,016.
There is wiggle room down to 2,375-2,350 if 2,400 and the middle of the uptrend fails. Major support is at 2,300 and the bottom of the current uptrend channel if 2,350 fails.
The Nasdaq started breaking out on Monday and is just 1% away from our February 23rd Price Target of 20,000 when the index was at 15,996. There weren’t many Wall Street analysts calling for this magical number and we expect the talking heads to push this narrative this week. The current uptrend channel is now showing near-term upside towards 20,500 on closes above 20,000. The first wave of support is at 19,600-19,500 followed by 19,250 and the bottom of the current uptrend channel.
The S&P has recorded six-straight closes above 6,000 and seven of the past eight sessions. This level now represents the bottom of the current uptrend channel. There is stretch down to 5,950-5,900 and the 50-day moving average if 6,000 fails. The top of the current uptrend channel shows momentum to 6,300 with our February price target for yearend at 6,500 when the index was at 5,088. This was slightly higher at 28% with 6,350 representing a 25% run.
The Dow is hovering in the middle of its uptrend channel with closes above 45,200 suggesting a renewed breakout to higher highs. The near-term top of the channel has moved up 46,500 with our February Price Target at 50,000. As a reminder, Nvidia (NVDA) was added to the index on November 4th. There are several layers of key support starting at 44,500 and 44,000.
In summary, there is no need to turn cautious on the overall market until the Nasdaq falls back below 19,250; the Dow slips under 44,000; and the S&P fails to hold 6,000. We mentioned the small-caps cracking point at 2,300 would also be a bearish development.
The Volatility Index (VIX) tagged a multi-month low of 12.70 with crucial support throughout July at 12.75 getting tripped but holding. We have targeted a possible drop towards 11.50 on continued closes below 12.75. Resistance is at 13.50 with additional layers at 15 and 17.50.
The third-quarter earnings season has pretty much concluded but there are some key companies reporting numbers throughout the week. The fourth-quarter earnings season (and yearend 2024 results) begins in early January and will have a major impact on the market. The presidential change of guard could also play a major role but events we don’t have to plan for until another few weeks. Until then, we said to stay bullish as the charts continue to give great clues.