6 Key Indicators for Next Week's Market: Bounce or Fade?
Actionable Insights to Prepare for the Week Ahead - End of Month Special Charts
The predicted volatility four months ago, following the S&P 500's breach of the $6,099 level, is still playing out. The market briefly pushed to $6,147 before a sharp 5% decline over seven trading sessions, filling the $5,871.9 gap.
Pullbacks do not occur in a straight line down, bounces occur and what happened on Friday was anticipated last Wednesday in the Macro edition (access here) based on this chart for the volatility index in the premium section:
“The Volatility Index indicates that we're approaching or at an overbought peak in the immediate term. Therefore, a short-term bounce in the market would be unsurprising.” Night of Wednesday, Feb 26th
On Friday, the SPX did manage to bounce based on overbought technicals for the volatility index, and oversold indicators for the index considering Bollinger bands, Stochastic, and the third weekly support zone $5,826 in confluence with the monthly $5,833 support (when there is confluence between weekly and monthly lines, the thresholds are stronger):
There is significant damage in the daily structure, and most importantly, we will analyze below the weekly and monthly charts, which suggest that this bounce will find rejection in 5,979.9 - 6,052.9 range, based on weekly and monthly levels posted yesterday for SPX and 34 other securities. click here for access.
S/R LEVELS: There is a notable element about the Levels published every Friday for 35 securities, price action continues moving in the general range dictated ahead of every week, but it is reaching extended bearish levels (red arrows) in most of the securities analyzed; remember that last year the usual was to see price jumping to the upper range of the levels (green arrows), nowadays we’re observing the opposite and that is a major shift in momentum.
Bitcoin, Tesla, Nvidia, NDX, SPX, IWM, MSTR, PLTR reached the extended bearish targets during the week; keep in mind those extended ranges based in the S/R publication for every analysis presented today.
Importantly, macro indicators are actively raising warning flags. This is not a subjective viewpoint, but rather a conclusion drawn from historical chart data and the established patterns of macro indicators that have consistently preceded significant moves in the SPX, NDX, and the overall stock market. I've included 14 macro charts to illustrate these critical leading economic indicators. click here for access.
Let’s begin with the weekly analysis with 24 charts and specific price levels:
SMH (Semiconductors)
Last week, I anticipated a bearish continuation for semiconductors, targeting $246.2, with the outcome contingent on NVDA's earnings. NVDA's decline subsequently propelled SMH directly to the annual level of $231.2, a target outlined in this publication since January.
Price found support at this annual level, which coincides with the lower Bollinger Band and a volume shelf below the current price range. While Friday's price action suggests a potential bounce, a sustained recovery is not assured due to a significant development: the 40-week moving average (purple line) has been decisively breached. This breach has historically preceded substantial pullbacks, as seen in 2015, 2018, 2020, and 2022. Only in August 2024 was there a momentary breach at the weekly opening, following three weeks of selling. Currently, SMH's technical position is more aligned with the aforementioned years, as it is not exhibiting oversold conditions.
Based on monthly support and resistance levels, $211 remains a potential target. However, we should observe price action at shorter timeframe levels for immediate guidance.
For bearish continuation next week, price must remain below $236.8, with an immediate target of $221.6. Conversely, if a bounce gains momentum, which is plausible at the start of the week, a daily or 4-hour candle close above $236 is required to validate a move towards $248.
TSLA
This publication was bullish on Tesla on October 19th when the sentiment towards the stock was very negative, back then many indicators were raising several bullish reversal signals in addition to the doji at the 20MA presented in the chart below. By the end of December, when many people were euphoric on Tesla, I raised in this publication bearish signals that technical indicators were flagging, like the shooting star breaching the weekly Bollinger band, and other oscillators not included today.
After two months of updates including bearish targets revised considering signals like the bearish MACD crossover, the chart today presents price action bouncing from the volume shelf, in confluence with the 40MA (not in chart). A bounce is likely and $320 to $330 can be considered as a multi-week destination considered monthly levels shared yesterday (click here) and if the key central level is recovered. Before reaching that, let's examine this week's trading ranges. A bearish continuation (before bounce) is expected if price remains below $303, targeting $263.6. Conversely, a bullish reversal could target $332.4 if the $303 level is reclaimed.
The same in-depth analysis describing the current setups, with price targets and key annual support and resistance levels continues for SPX, DXY, GLD, SLV, TLT, DJI, NDX, IWM, MSTR, PLTR, GOOG, AAPL, NVDA, META, MSFT, AMZN, and BTC; with volatility and breadth indicators analyzed. If you actively invest or trade any of these securities, this publication is essential for making informed investment decisions. The TSLA case is one of many reversals warned weeks ago, included the ones for Bitcoin, AAPL, IWM, SPX, NDX, DXY; and more recently, the ones for GLD and SLV last week, both came true.
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Let’s continue with the charts and indicators to watch next week, there are special analyses considering the end of the month. Many charts are using Volume Profile, you can visit educational content about it in the site, click here.
SPX Weekly and Monthly Charts: Risks Persist