Monday's Effort Was Better Than Nothing, But Just Barely

Posted by jbrumley on March 13, 2023 6:19 PM

It coulda been worse. But, it coulda been better.

As was noted in this weekend's Weekly Market Outlook, last week's drubbing dragged most of the major market indices under key technical support levels, portending weakness ahead. There was still a smidgen of a chance stocks could bounce back into a bullish gear before reaching the point of no return, but only a smidgen. We're no closer to that recovery even after Monday's intraday advance.

Take a look at the daily chart of the S&P 500 to see why. Today's high was still lower than Friday's, and today's low was still below Friday's low. And, at no point was the 200-day moving average line (green) at any real risk of being tested as a ceiling. By the time things cooled off near the end of the day, the buyers were backing off too. The S&P 500 ended Monday's session with a small loss.

The NASDAQ Composite fared a little better, sort of. In other ways though, it actually did worse. It managed to crawl back above its 100-day moving average line (gray) at 11,163 and even got within kissing distance of the 50-day moving average line (purple) before peeling back to a minimal gain on Monday. There's the rub. It looks like the composite only had to merely approach this moving average line -- and the green 200-day moving average line above it -- to start selling off again.

It's too soon to jump to any conclusions. Breakdown and rebounds are always more of a process than an event, so this sort of post-plunge action could have been expected to matter what to start this week. Nevertheless, it's worth noting what didn't happen today... not even a little. If the bulls don't work their way back above the aforementioned moving averages by the middle of this week and instead we see an even lower low, that's going to be a tough stumble for traders to ignore.

Side note: Both the VXN and the VIX continued to inch their way higher today. Both have room to keep climbing before bumping into technical ceilings too, which means the bears have room to continue dragging stocks lower before any psychological or technical floors become a factor. One that we're still keeping a close eye on is the NASDAQ's support around 10,307, where it bottomed in October, November, as well as in December.

A dip to that mark might actually be idea for the bulls, in fact, cleaning up whatever overhang is standing in the way right now and allowing the market to good a good running start to a breakout effort with a firm floor to push up and off of. But, let's worry about that if-and-when it matters.