Technical Outlook Remains Bullish
- For the week, the Nasdaq rose 0.2% while the S&P slipped 0.2%. The Dow and the Russell were up nine points each. The only major index that is still holding its uptrend channel is the Nasdaq but that is showing signs of cracking after Friday’s action.
- All of the major indexes are in slight trading ranges following last week’s action and something we have talked about as June winds down and with the second-quarter earnings season around the corner. The good news is that a consolidation period is healthy and golden crosses are in the midst of forming on the Nasdaq and the S&P 500.
- The Dow and the Russell’s 50-day moving averages are also curling higher and on track to clear their 200-day moving averages, as well, but aren’t as pronounced as the other two major indexes. Golden crosses tend to lead to higher highs down the road and a summertime rally still appears to be in the works.
The stock market was mostly lower on Friday with the blue-chips bucking the trend after eking out a gain. The action concluded a lackluster week as Wall Street digested the latest Fed news and ongoing geopolitical events.
The Nasdaq tagged a low of 19,380 before finishing at 19,447 (-0.5%). Support at 19,500 failed to hold. Resistance is at 19,750.
The S&P 500 went out at 5,967 (-0.2%) with the low at 5,952. Key support at 5,950 held. Resistance is at 6,000.
The Dow traded to a high of 42,432 while settling at 42,206 (+0.1%). Resistance at 42,500 held. Support is at 42,000.
Earnings and Economic News
Before the open: Commercial Metals (CMC), FactSet Research Systems (FDS)
After the close: KB Home (KBH)
Economic News
PMI Manufacturing Index – 9:45am
Existing Home Sales – 10:00am
Technical Outlook and Market Thoughts
For the week, the Nasdaq rose 0.2% while the S&P slipped 0.2%. The Dow and the Russell were up nine points each. The only major index that is still holding its uptrend channel is the Nasdaq but that is showing signs of cracking after Friday’s action.
All of the major indexes are in slight trading ranges following last week’s action and something we have talked about as June winds down and with the second-quarter earnings season around the corner. The good news is that a consolidation period is healthy and golden crosses are in the midst of forming on the Nasdaq and the S&P 500.
The Dow and the Russell’s 50-day moving averages are also curling higher and on track to clear their 200-day moving averages, as well, but aren’t as pronounced as the other two major indexes. Golden crosses tend to lead to higher highs down the road and a summertime rally still appears to be in the works.
The Nasdaq has been trading between 19,250-19,750 for 13-straight sessions. Continued closes above the latter would indicate a run to 20,000-20,250 with last December’s all-time top at 20,204.
A move below 19,250 and solid breakdown out of the uptrend channel could lead to 4% risk down to 18,500 and the 200-day moving average. A golden cross is 258 points away from forming.
The S&P 500 has settled below 6,000 for the three-straight sessions with 5,950 holding ahead of the weekend. A fade below this this level gets nervousness down to 5,900-5,850 and the 200-day moving average in focus.
More important resistance remains at 6,050. A move above 6,075 would likely suggest strength to 6,100-6,150 with the all-time peak at 6,147. A golden cross is just 78 points away from becoming official.
The Russell 2000 held 2,100 all of last week while trading in a 34-point range. A close above 2,135 should lead to a quick retest to 2,175 and the 200-day moving average.
Backup support is at 2,075 if 2,100 fails to hold. A move below 2,075 would be a bearish development with further fade potential down to 2,050-2,025 and the 50-day moving average.
The Dow continues to trade within a 1,000-point trading range between 42,000-43,000 following the May 27th breakout above the former. A drop below support at 42,000 could lead to weakness down to 41,750-41,500 and the 50-day moving average.
Closes above 42,500-42,750 and the 200-day moving average would be bullish for upside to 43,250-43,500.
The Volatility Index (VIX) broke down like a rented mule last week despite closing above 20 for the third-straight session. Upper support at 19.50-19 was tripped but held on Friday’s push down to 19.11.
Near-term resistance remains at 22-22.50. Closes above 24-25 and the 50-day moving average would reopen upside pressure to 30 and would be a bearish signal for the market.
Key support levels that we continue to highlight are still holding: Nasdaq 19,250; S&P 5,950; Russell 2,075; and a readjusted Dow at 42,000. Once again, a break below these levels would be a slightly bearish development for the overall market.
Markets across the Middle East ended mostly higher on Sunday despite the news the US entered the war between Israel and Iran. As we head to press, futures were down about 0.3% across the board for the major indexes.