Stock Market Magic: An Exciting End | chart watcher

What a transformation! PCE data released today was in line with expectations and initially lifted the stock market. We then experienced a significant sell-off, but things took a turn in the last half hour. Stocks rose until the close, showing that investor optimism is not dead. The S&P 500 ($SPX) and Dow Jones Industrial Average ($INDU) closed higher, while the Nasdaq Composite Index ($COMPQ) was flat.

The movements of the stock market today show how it can make money, and there is no way to predict how it will turn out. PCE came out as expected and realistically shouldn’t have changed investor sentiment. Expectations of one rate cut in 2024 are still in place, so it made sense to see a selloff for most of the trading day. However, a big jump right before the close makes it difficult for investors to be pessimistic.

A closer look at trading activity

Technology stocks sold off heavily throughout the day. The weekly chart of the Nasdaq Composite (see below) shows that had it not been for the gains at the end of the trading day/week/month, the index may have closed below the first support level (blue dotted line). . Instead, it was able to close well above the support level.

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So does that mean the index will hit a new high next week? This is to be expected, but you should always be prepared for the market to go in either direction.

Chart 1. Nasdaq composite weekly chart. The index looked set to close below the first level, but buying pressure dominated and the index closed on a relatively optimistic note for the week.Chart source: StockCharts.com. For educational purposes.

Not much has changed. The Nasdaq is trading above its 50-day simple moving average (SMA) and its 21-day exponential moving average (EMA), which are also trending upward.

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Like the weekly chart, the daily chart of the Nasdaq Composite Index also shows a clear line in the sand. The range today was significant and it looked like there might be a short-term technical support outage, but the index ended the week without any worries.

Chart 2. Daily chart of the Nasdaq Composite Index. There is a clear sand line on the Nasdaq’s daily chart, and there is enough buying interest to keep the index above initial support levels.Chart source: StockCharts.com. For educational purposes.

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The selling off of technology stocks can be blamed on semiconductors. To understand this better, it makes sense to bring up the NVIDIA (NVDA) chart. That’s because the price movements of stocks tend to be correlated with the price movements of the Nasdaq and S&P 500.

NVDA’s daily chart below shows clear resistance levels. From March to May, NVDA’s stock price found resistance around $965 and has since risen several times.

Chart 3. NVDA daily chart. Could the stock fall to previous resistance levels?Chart source: StockCharts.com. For educational purposes.

NVDA’s recent performance has sent its stock price soaring, but buying appears to have been exhausted. The question is whether NVDA’s stock price will return to the $965 level. For a while it seemed like that could happen. We’ll have to wait until next week to see which way investor sentiment tilts.

Explore StockCharts MarketCarpet It’s a good indicator of today’s market activity. It’s clear that NVDA and Amazon, Inc. (AMZN) had the biggest losses, but there was a lot of green overall. The dark green squares show the biggest gains, and one that stands out in the technology sector is Salesforce.com, Inc. (CRM). Shares rose 7.5% on Friday, after falling nearly 20% on Thursday following a dismal earnings report.

Chart 4. The big picture. StockCharts MarketCarpet provides a good overview of market performance.Chart source: StockCharts.com.

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Interestingly, the technology and communications services sector has not been green. However, other sectors performed relatively well. Two stocks to watch are Gap Stores (GPS) and Deckers Outdoor Corp. (DECK).

Chart 5. Retail inventory surges. Gap, Inc. (GPS) and Deckers Outdoors (DECK) are showing significant strength. These two stocks should be on your radar.Chart source: StockChartsACP. For educational purposes.

GPS rose on strong first quarter results and strong guidance. DECK’s stock price is on the rise thanks to the popularity of Hoka shoes. The rise in these stocks indicates that the retail sector continues to be strong.

takeout

Overall, May ended on a positive note. Perhaps the ‘sell in May and leave’ strategy will have to wait. There will be some performance next week, but the focus will be on macro data. Will the data be enough to move the needle? Hotting up job numbers will probably have the biggest impact.

weekend wrap up

• The S&P 500 rose 0.80% to 5,277.51 and the Dow Jones Industrial Average rose 1.50% to 38,686.32. The Nasdaq Composite Index closed at 16,735.02, down 0.01%.
• $VIX fell 10.71% to 12.92
• Best performing sector this week: Energy
• Worst performing sector this week: Technology
• Top 5 Large Cap SCTR Stocks: MicroStrategy Inc. (MSTR); Vistra Energy Corporation (VST); Nvidia (NVDA); Super Microcomputer (SMCI); Robinhood Market (HOOD)

On the radar next week

• May Manufacturing PMI
• May Service PMI
• April JOLTS Recruitment Notice
• May Nonfarm Payroll
• Earnings from CrowdStrike Holdings (CRWD), Hewlett Packard (HP), and Lululemon Athletica (LULU)

disclaimer: This blog is written for educational purposes only and should not be construed as financial advice. You should not use any of our ideas and strategies without first evaluating your personal and financial situation or consulting a financial professional.