The stock market was mostly higher on Friday after fresh record highs across the board as Tech lagged into the close and the small-caps outperformed. The blue-chips broke out of a three-week trading range while volatility remained rangebound a week before the start of the third-quarter earnings season.
The Nasdaq closed at 22,780 (-0.3%) after testing a low of 22,695. Support at 22,500 held. Undefined resistance is at 23,000.
The S&P 500 tagged 6,750 while finishing at 6,715 (+0.01%). Resistance at 6,750 held. Support is at 6,700.
The Dow settled at 46,758 (+0.5%) with the peak at 47,049. Resistance at 47,000 was cleared but held. Support is at 46,500.
Earnings and Economic News
Before the open: VCI Global (VCIG)
After the close: Aehr Test Systems (AEHR), Constellation Brands (STZ)
Economic News
None (government shutdown)
Technical Outlook and Market Thoughts
For the week, the Russell rallied 1.7% and the Nasdaq added 1.3%. The Dow and the S&P gained 1.1%. Year-to-date, the Nasdaq has surged 18% and the S&P has jumped 14.2%. The Dow has spiked 9.9% and the Russell is up over 9%, for 2025.
The uptrend channels for the major indexes remain intact with the S&P the closest to falling out of its readjusted channel off the September 2nd intraday lows. There is a little stretch on possibly adjusting the Russell’s uptrend channel but it’s not going to make much difference if the index can make higher highs this week.
We highlighted the Dow Transports last week and wanted to see a possible breakout above the top of the current 400-point trading range. We stated the Transports can often provide early clues on the Dow’s trends and Friday’s action looked bullish for some follow through this week. Closes above 15,900 would be a bullish development while closes below 15,500 and the 200-day moving average would be a bearish signal.
Turning to the major indexes, the Russell 2000 just missed clearing our February 23rd, 2024 at 2,500 by a field goal after tapping a new all-time high of 2,497. We are blue-in-the-face repeating how important it is for the index to clear and hold this level for multiple sessions this month to avoid a four-year triple-top breakdown.
Shaky support is trying to move up to 2,450-2,425. A drop below 2,400 and the bottom of the uptrend channel would be slightly bearish with additional risk down to 2,375-2,339.
The Nasdaq pushed undefined and lower resistance at 23,000-23,250 and our revised price targets from August 11th after making a run to 22,886. Our previous targets for the index had been at 20,000 when the index was at 15,996 on February 23rd, 2024 and 22,000 this past January. We will go on record to say 23,750-24,000 could come into play if 23,250 is cleared. The index is up 55% off the April 7th low of 14,784 and 24,000 would represent a 62% surge.
Support is at 22,500 and the bottom of the uptrend channel. Additional support levels are at 22,000 followed by 21,750-21,500 and the 50-day moving average.
The S&P 500 kissed but failed to hold our August 11th and upper resistance price target at 6,700-6,750. This was raised from our February 2024 price targets of 6,350-6,500 when the index was at 5,088. Last week, we upped our Price Target to 7,000 if the latter is cleared and held for multiple sessions.
Support is at 6,650-6,600. A move below the latter and out of the uptrend channel would imply downside action to 6,500 and the 50-day moving average.
The Dow hit an intraday high of 47,049 and was within shouting distance of our August 11th price target at 47,250. Our Price Target from February 23rd, 2024 for the blue-chips remains at 50,000 if there are continued closes above 47,250.
Support is at 46,500 followed by 45,750. A close below these levels and out of the uptrend channel would likely confirm a near-term top for the blue-chips with additional weakness down to 45,500-45,000 and the 50-day moving average.
The Volatility Index (VIX) remains in a three-month trading range between 15 and 17.50 with stretch to the upside and downside. A close above 17.50 is a neutral reading while multiple closes above 20 would be a very bearish sign for the bulls and the overall market.
Support is at 15 followed by 14.25-14. There is still a chance 13.50-12.75 comes into play on closes below the latter. The August 28th low is at 14.12.
The relative strength index (RSI) levels for the major indexes are in the upper 60’s with the Nasdaq clearing but failing to hold 70 into the weekend. Readings above 70 indicate overbought conditions but they can get stretched and stayed elevated throughout the summer.
We mentioned the government shutdown earlier and it has halted nonessential operations while delaying key economic news releases. While this isn’t necessarily a big deal for the stock market over the near-term, or long-term, it is best both sides continue to try and reach an agreement.
There have been 20 government shutdowns over the last 50 years, and the stock market has closed up during half of them and higher 3-6 months afterwards.
We expect this week could be rangebound as third-quarter earnings season will start next week. The Financial sector will start reporting next Tuesday, October 14th with the major Tech stocks later in the month.
