Bulls win week with slightly better than expected economic reports.
SPX Friday Closing Price - 6000
NASDAQ Friday Closing Price - 21761
RUT Friday Closing Price - 2132
All the important reports this past week (ISM and JOBS) came in slightly better than expected, meaning that bulls continued the recent uptrend, making new 9-week highs across the board. All indexes closed near the high of the week, suggesting further upside above last week's highs will be seen this week (DOW above 42924, SPX above 6016, NASDAQ above 21891, and the RUT above 2132).
The NASDAQ finds itself just 1.5% away from and all-time high and at a weekly closing level of decent resistance strength between 21774 and 21780 (closed on Friday at 21761), which if broken this coming Friday, would totally turn the tables around (chart-wise) on the bears in favor of the bulls.
This week, the inflation report comes out and the following week, the Fed rate decision is announced. Inflation is expected to remain the same (2%) with a very slight leaning to a higher number, and the Fed is expected to do nothing (keep rates the same). One thing that could be impactful for the market is that Trump has wanted the Fed to lower rates by 1 full percentage point and has also stated that he will be making a decision on Fed Chief Powell "very soon". All of this could impact the market, with the lowering of interest rates or firing of Powell being strongly favoring the indexes to make new highs, before the consequences of that action occur.
The Tech Industry (specifically AI) has been driving the market recently, with NVDA just 4.5% from a new all-time high weekly close. Having said all of the above, the indexes (more so the SPX and the NASDAQ) are at chart levels that are indicative. With no negative news expected to come out this week, but the possibility of Trump saying something that will be short-term bullish, the bulls do have the edge. By the same token, these resistance levels are decent, and computers and algorithms will be sellers here, so these are the levels to watch. In the NASDAQ100 any weekly close above 21780 (21900 on a daily closing basis) will give a mandate to the bulls for a new intraweek high above 22222 to be made. In the SPX and on a daily and weekly closing basis, the 5994-6001 area is the one that if broken, would give the bulls a mandate to test and break the all-time high daily closing high at 6144.
The index to watch is definitely the NASDAQ as AI is bullish and leading the charts. The dichotomy between the DOW and NASDAQ should continue, if and when the market is to continue higher. If that dichotomy changes and the DOW begins to lead the way, that could be a sign that things are turning around.
To the downside, here are the daily close levels to watch, which if broken would suggest the rally is likely over. In the NASDAQ100, that level is 20915, though a break below 21477 would slightly weaken the chart. In the SPX, the pivotal level is 5802. In the DOW that level is at 41603, and in the RUT, that level is at 2045.
The fundamental picture as it is seen now, suggests that there are 3 things that need to be watched: 1) the inflation report on Wednesday, 2) the Fed rate decision a week from this Wednesday and 3) Trump's decision on Fed Chief Powell. All are expected to help the bulls, if they come out as expected, which means that any negative surprise would help the bears. On the other side of the coin, and also overhanging the market right now, are the tariffs (as they are presently), which makes new all-time highs difficult to accomplish. For that reason, the charts are of strong importance this week and next. Given that the inflation report this week is unlikely to be "out of line", probabilities favor an uneventful week with no indicative move in either direction. As such, the following week is likely to be "the one" that decides direction for the summer.
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