- By Scott Brown, CMT Investopedia is partnering with CMT Association on this newsletter
- The contents of this newsletter are for informational and educational purposes only, however, and do not constitute […]
Investopedia is partnering with CMT Association on this newsletter. The contents of this newsletter are for informational and educational purposes only, however, and do not constitute investing advice. The guest authors, which may sell research to investors, and may trade or hold positions in securities mentioned herein do not represent the views of CMT Association or Investopedia. Please consult a financial advisor for investment recommendations and services
S&P 500 bounces back with a 1.5% gain
The S&P 500 bounced back from Friday’s selloff with a 1.5% to begin this week. While that keeps support at the rising 50-DMA intact, the index wasn’t able to reclaim the broken support at its 21-DMA (6666.61) and upper uptrend line.
Below are the short-term levels of interest, and you can see we closed at almost exactly the halfway point of Friday’s high and lows.
6670 is first resistance, followed by 6700. To the downside, a break of 6620 would be the first sign we are likely to retest the lows at 6550.
Dow Jones Industrial Average holds its 50-DMA
The Dow gained 1.2% yesterday, bouncing off its 50-DMA. Bullish bias as long as we remain above it (45,561 and rising) and the breakout zone near 45k.
The levels for QQQ are well-defined
The Nasdaq 100 led large-cap indexes yesterday with a 2.1% gain. However, it wasn’t enough to reclaim broken support at $603, so until that happens, QQQ is tactically rangebound. To the downside, $588.50 key support, and a break could target a move below the 50-day.
Russell 2000 remains untouchable if IWM below $245
Small caps led yesterday, with the Russell 2000 climbing 2.8%. However, IWM remains below the long-term resistance level of $245 and speculative stocks were a big driver of the move. Small-cap value (+2.2%) had a more subdued move as did profitable small caps (IJR +2.0%).
Character of Monday’s rally
I would characterize Monday’s move higher as “good, not great” under the surface.
- Advancers outnumbered decliners by 3.7 to 1 on the NYSE.
- Within S&P 500 stocks, it was just 2.5 to 1.
- Only 11 S&P 500 stocks traded to a one-month high, indicating few stocks overcame last week’s high point.
Leadership leaned risk-on, with the Brown Technical Insights custom Top Tech 8 (+2.5%) and Cyclicals baskets (+1.5%) outperforming the Defensives group (-0.1%).
- High beta outperformed low vol by 3.3%.
- Equal-weight discretionary outperformed equal-weight consumer staples by 1.7%.
- Healthcare and consumer staples were the only sectors lower on a cap-weighted basis.
My overarching takeaway is that Monday’s bounce wasn’t an equal and opposite reaction to Friday’s selloff. There’s more work to be done, and the leadership profile and breadth of the rest of the week will be important for the near-term call.
Scott Brown, CMT is the founder and chief strategist at Brown Technical Insights, a research service providing essential insights into market trends, technicals, and opportunities. He has been a member of the CMT association since 2017 and received his charter in 2019. You can follow him on X and subscribe to his newsletter at www.BrownInsights.com.
Shared content and posted charts are intended to be used for informational and educational purposes only. CMT Association does not offer, and this information shall not be understood or construed as, financial advice or investment recommendations. The information provided is not a substitute for advice from an investment professional. CMT Association does not accept liability for any financial loss or damage our audience may incur.
