My professional evaluation of the stock market action for this past week and what will likely happen this coming week and for May. I do want to remind everyone of the known stock market adage and seasonal fact that says "Sell in May and go Away"
DOW Friday Closing Price - 41317
SPX Friday Closing Price - 5686
NASDAQ Friday Closing Price - 20102
RUT Friday Closing Price - 2020
This past week turned out to be a win for the bulls, with all indexes rallying between 2.8% and 3.8%. It was a week full of economic and earnings reports of consequence. The first report was a negative one with the GDP number coming in negative at -3%, meaning the economy is shrinking. Nonetheless, the PCE inflation number showed further decline, the ISM number being slightly better than expected, the Jobs report coming in better than expected and the earnings reports on AAPL and AMZN also coming in slightly better than expected. The GDP was negative to the market and the indexes opened substantially lower but the fact that the economy is shrinking suggests that the Fed may begin cutting rates sooner (rather than later) and that was a positive. That day, and in spite of the lower opening, the indexes closed green and the rest of the week, more green was seen.
Chart-wise, nothing of great consequence occurred. Buy signals were given on the daily closing charts and some minor weekly close resistance levels were broken, but considering the downtrend that started in February, the indexes remain below the 200-day MA's, and that means that the downtrend remains intact, or if a bottom has been found, more retesting of the lows, as well as rebuilding of support levels will be seen. Having said that, the NASDAQ did get up to the line and the SPX is within 46 points of the line and the overall negative outlook of the tariffs remain, meaning that at this time, further upside of any consequence is unlikely to be seen.
It does need to be mentioned that the NASDAQ has been the leader to the upside, having rallied 17.8% from the lows and the DOW only 11.2% from the lows. Nonetheless, the big 5 companies in the index (AAPL, AMZN, GOOGL, NFLX and META) have already reported earnings and both (AAPL and AMZN) which reported earnings on Thursday night, closed red on Friday, which suggests the driving force for the index has gone away. The 200-day MA is currently at 20176, and that was Friday's high. It is expected the indexes will go higher this coming week but unless the index generates a confirmed close above the line "and" breaks above 20298, it is likely the rally is over.
The Fed reports its rate decision on Wednesday, and it is NOT expected that they will cut rates at this time. If that is their decision, the negative GDP number will weigh heavily on the market and selling interest is likely to be seen. In addition and giving extra support to the "selling interest" idea, is that the indexes have closed green for the past 9 days and no support levels have been built nearby below. The NASDAQ does show a breakaway/runaway gap at 18396 and at 19612 and the very least expected is that the runaway gap will be tested this coming week. If closed, the breakaway gap will become a magnet. The index has moved up 2300 points (11.5%) without any pullback and the fundamental picture does not support that scenario. In looking at the daily closing chart, a drop back down to 18421 is a definite possibility.
As far as the other indexes are concerned, the DOW is still 905 points away from the 200-day MA, meaning it has not truly participated in the rally like the other indexes have. The line is at 42222 but there is minor-to-decent daily close resistance at 41568. In the SPX, the MA line is at 5746 and there is pivotal daily close resistance at 5776. The RUT has actually outperformed the other indexes, inasmuch as the index has rallied 12.9% (compared to the NAZ at 11.5%) and did close above the 200-week MA (currently at 2004). Nonetheless and with the index still being 166 points below the 200-day MA, the close above the weekly MA is not that indicative, other than to suggest that the downtrend is over and that the index might keep overperforming the other indexes from here on in.
The indexes did close on the highs of the week and further upside is expected to be seen, above last week's highs (DOW at 41386, SPX at 5433, NAZ at 20176 and RUT at 2026). The thing to watch this week is the DOW vs the NASDAQ dichotomy. If the indexes have reached a top to this rally, that dichotomy should favor the DOW. In fact and given that for the first 2 days of this week, there is nothing in the form of reports to prevent the bulls from taking the indexes higher, the dichotomy will be a great indicator. In addition, the SPX and the NASDAQ have already gone above last month's highs, while the DOW and the RUT have not. As such, if these two indexes outperform the other two at the beginning of the week, it will be indicative. Having said all of this, if the present dichotomy continues and the NASDAQ gets above 20292, it will likely rally up to 20696 and perhaps up to 21182. If that occurs, it will be a "new" ballgame.
DOW Friday Closing Price - 41317
SPX Friday Closing Price - 5686
NASDAQ Friday Closing Price - 20102
RUT Friday Closing Price - 2020
This past week turned out to be a win for the bulls, with all indexes rallying between 2.8% and 3.8%. It was a week full of economic and earnings reports of consequence. The first report was a negative one with the GDP number coming in negative at -3%, meaning the economy is shrinking. Nonetheless, the PCE inflation number showed further decline, the ISM number being slightly better than expected, the Jobs report coming in better than expected and the earnings reports on AAPL and AMZN also coming in slightly better than expected. The GDP was negative to the market and the indexes opened substantially lower but the fact that the economy is shrinking suggests that the Fed may begin cutting rates sooner (rather than later) and that was a positive. That day, and in spite of the lower opening, the indexes closed green and the rest of the week, more green was seen.
Chart-wise, nothing of great consequence occurred. Buy signals were given on the daily closing charts and some minor weekly close resistance levels were broken, but considering the downtrend that started in February, the indexes remain below the 200-day MA's, and that means that the downtrend remains intact, or if a bottom has been found, more retesting of the lows, as well as rebuilding of support levels will be seen. Having said that, the NASDAQ did get up to the line and the SPX is within 46 points of the line and the overall negative outlook of the tariffs remain, meaning that at this time, further upside of any consequence is unlikely to be seen.
It does need to be mentioned that the NASDAQ has been the leader to the upside, having rallied 17.8% from the lows and the DOW only 11.2% from the lows. Nonetheless, the big 5 companies in the index (AAPL, AMZN, GOOGL, NFLX and META) have already reported earnings and both (AAPL and AMZN) which reported earnings on Thursday night, closed red on Friday, which suggests the driving force for the index has gone away. The 200-day MA is currently at 20176, and that was Friday's high. It is expected the indexes will go higher this coming week but unless the index generates a confirmed close above the line "and" breaks above 20298, it is likely the rally is over.
The Fed reports its rate decision on Wednesday, and it is NOT expected that they will cut rates at this time. If that is their decision, the negative GDP number will weigh heavily on the market and selling interest is likely to be seen. In addition and giving extra support to the "selling interest" idea, is that the indexes have closed green for the past 9 days and no support levels have been built nearby below. The NASDAQ does show a breakaway/runaway gap at 18396 and at 19612 and the very least expected is that the runaway gap will be tested this coming week. If closed, the breakaway gap will become a magnet. The index has moved up 2300 points (11.5%) without any pullback and the fundamental picture does not support that scenario. In looking at the daily closing chart, a drop back down to 18421 is a definite possibility.
As far as the other indexes are concerned, the DOW is still 905 points away from the 200-day MA, meaning it has not truly participated in the rally like the other indexes have. The line is at 42222 but there is minor-to-decent daily close resistance at 41568. In the SPX, the MA line is at 5746 and there is pivotal daily close resistance at 5776. The RUT has actually outperformed the other indexes, inasmuch as the index has rallied 12.9% (compared to the NAZ at 11.5%) and did close above the 200-week MA (currently at 2004). Nonetheless and with the index still being 166 points below the 200-day MA, the close above the weekly MA is not that indicative, other than to suggest that the downtrend is over and that the index might keep overperforming the other indexes from here on in.
The indexes did close on the highs of the week and further upside is expected to be seen, above last week's highs (DOW at 41386, SPX at 5433, NAZ at 20176 and RUT at 2026). The thing to watch this week is the DOW vs the NASDAQ dichotomy. If the indexes have reached a top to this rally, that dichotomy should favor the DOW. In fact and given that for the first 2 days of this week, there is nothing in the form of reports to prevent the bulls from taking the indexes higher, the dichotomy will be a great indicator. In addition, the SPX and the NASDAQ have already gone above last month's highs, while the DOW and the RUT have not. As such, if these two indexes outperform the other two at the beginning of the week, it will be indicative. Having said all of this, if the present dichotomy continues and the NASDAQ gets above 20292, it will likely rally up to 20696 and perhaps up to 21182. If that occurs, it will be a "new" ballgame.
