Title: Stock Market Faces Potential Losses as Selling Pressure and Bearish Signals Build
Subtitle: S&P 500 and Nasdaq at Risk of Breaking Key Support Levels
**Introduction**
The stock market began last week with breakdown gaps for the S&P 500 and Nasdaq, a trend that continued with further moves to close more gaps. However, the market peaked on Friday and experienced a reversal. As a result, there is a high likelihood of further losses heading into this week.
**Bearish Signs and Key Support Levels**
If these losses materialize, the likely test would be the 50-day moving averages (MAs). Both the S&P 500 and Nasdaq have been holding onto their 20-day MA support since 2024, but a fourth test of the latter moving average would likely be too much for it to handle as support. Additionally, MACD ‘sell’ triggers are adding to the selling pressure in the market.
Furthermore, the Nasdaq is underperforming relative to the S&P 500, indicating that if there is an index to crack first, it will likely be the Nasdaq.
**Technical Analysis and Market Performance**
While the market faced selling pressure, the Russell 2000 (IWM) managed to post a new swing high before easing back below its peak. However, volume rose in distribution, compounding the initial selling. The technical indicators are still net positive, and the Russell 2000 is leading both the S&P 500 and Nasdaq in terms of performance.
**Outlook and Potential Goals**
If the week starts with a down day, market participants can expect an undercut of last week’s lows as a minimum goal. Both the S&P 500 and Nasdaq need to work off their historic price extremes relative to their 200-day MAs. However, investors need not worry, as this weakness can actually benefit those utilizing a dollar-cost-average approach.
**Conclusion**
The stock market is facing potential losses as selling pressure continues to build. Key support levels are at risk of being broken, and bearish indicators are adding to the market’s downward momentum. The Russell 2000 remains relatively strong, but the underperformance of the Nasdaq suggests it may be the first to crack. Investors should brace for a challenging week ahead, but those employing a long-term investment strategy can take advantage of any weakness in the market.
Analyst comment
Negative news. Analyst: The stock market is likely to experience further losses as selling pressure builds and key support levels are at risk of being broken. The Nasdaq may be the first to crack. Investors should brace for a challenging week ahead, but long-term investors may find opportunities in market weakness.
