The ongoing story during this downdraft is that the stock market is just not seeing bidders as prices cascade lower. On Monday, the S&P 500 (SPX) fell 2.7% and the Nasdaq and Nasdaq 100 were off about 4%. The “500” slid through the 50% retracement and chart support in the 5,650 region like it wasn't even there, notes John Eade, president of Argus Research.
Wall Street firms are pulling their bullish 2025 outlooks as fast as Saquon Barkley cuts through defenses. The SPX also fell through its 50-week average for the first time since one week in October 2023.
The next area of key support comes from a 61.8% retracement of the rally from August until the recent all-time closing high in February, near 5,510. The index has completed a double top on the weekly chart, which is not that common.
A measured move based on the size of the pattern initially targets 5,500 and then 5,400. The index is now below its 13-, 26-, and 40-week moving averages for the first time since October 2023, which sometimes can lead to much deeper downside moves.
Still, to confirm longer-term damage, we need the 13-week to break both the 26- and 40-week and the 26-week to cross below the 40-week average. The SPX also has (very quickly) broken below its lower weekly Bollinger Band, again for the first time since October 2023. That sets up the potential for a fairly reliable buy signal if the index can reclaim the lower band.
While the percentage of SPX stocks above their 200-day averages has fallen close to danger territory (47%), we are seeing other breadth measures tracing out higher lows as price moves to new lows.
Technical Assessment
Intermediate-Term: Neutral
Long-Term: Bullish
Strengthening Sectors: Real Estate and Consumer Staples
Weakening Sectors: Information Technology, Consumer Discretionary
