The driving market theme over the past week has been a test of support for the NASDAQ Composite and the S&P 500 Indexes. The NASDAQ is pulling into its 10-dma and approaching the top of its trendline breakout of last week in the 7438-39 price area, so the picture hasn’t changed all that much from that described in my Wednesday mid-week report. If the NASDAQ can hold support, then the pullback is likely a healthy antidote to an extreme overbought condition. If not, then we will see further downside.
The S&P 500 Index, which remains well off its January highs, is having a test of support of its own as it drops down to its 50-dma. So far, over the past three days, the index has been able to hold support at the line, which serves as a good reference for assessing the health of the S&P. As with the NASDAQ, if we bust support, then more downside is likely in store.
The S&P 500 and the NASDAQ both churned around on Friday, opening higher and then closing below their opening highs and near the lows of their daily trading ranges. Volume was high due to triple-witching options expiration, giving their charts the look of heavy-volume churning action. This also resulted in a number of pocket pivots, with most of the volume coming in a large surge of shares crossing the tape at the close.
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