Rising Fear and Monthly Market Declines
After two years of massive returns in U.S. markets and the arrival of a new president known for surprise announcements, it’s more important than ever to review broad market and sector indexes for key support and resistance levels. Looking at sector performance over the past month, Energy leads the way with a 6.47% gain, while all other major sectors are in the red. Real Estate saw the largest decline, down 4.80%, followed by Information Technology, which dropped 3.41%. Most other sectors are down over 2%, with Utilities holding up relatively better, declining just 1.08%. Within the Energy sector, futures are seeing significant gains, with Natural Gas leading the charge, up 31.97% over the last month. Both Brent and WTI Crude are up over 9% during the same period. This has put pressure on major indexes over the last month, with the smaller-cap Russell 2000 taking the biggest hit, down 3.40%. The NASDAQ slipped 2.09%, while mega-caps held up the best, with the smallest decline of 1.57%. In Canada, the situation is reversed, with the S&P/TSX 60 down 2.04%, and the S&P/TSX Mid and Small-Cap indexes down 1.42% and 0.34%, respectively, likely buoyed somewhat due to the collection of smaller energy constituents. Bonds were the standout asset class of the month, with the CBOE 5-Year, 10-Year, and 30-Year up 4.61%, 5.77%, and 5.72%, respectively. It’s also important to note volatility, with the CBOE SPX Volatility Index showing fluctuations over the past quarter. The 3-month number was down 21.90%, while the last month saw a rebound of 16.73%. However, the index dropped again last week, down 13.84%, which may indicate a renewed sense of fear entering in the market.
S&P 500 (SP500): Potential Breakout & Breakdown Levels
Reviewing the point and figure (PNF) chart of the S&P 500 Index (SP500) shows a series of declining tops since December, based on a 0.50% scale. This short-term chart, with its small box size and quick 3-box reversal, illustrates the narrowing trading range that has emerged over the past month. The chart also features a quadruple bottom, circled in black, which, unless corrected by an upside breakout past the downsloping black line, may signal market participants' reluctance to push the market higher—at least until there is more clarity on the new administration’s agenda.If the PNF chart shifts back into a column of O’s and closes at 5813, a PNF catapult would complete on this short-term 0.50% chart, with 5698 and 5642 becoming the new support levels. Beyond this, the 5235-5209 range would offer further support, representing a market correction of just over 10%. To the upside, should the downsloping flag be breached, resistance would be found at 6020, followed by 6110, which could pave the way for a significant move higher toward a new resistance level of 6327, based on the vertical PNF count from the December column of X’s. For now, it remains a "wait and see" situation.
NASDAQ Composite Analysis: Declining Tops, Key Support
A similar trend is emerging on the NASDAQ Composite Index (NASDAQ), where a series of declining tops has characterized the late 2024 and early 2025 trading period, alongside a triple bottom on the 0.5% point-and-figure chart. Currently under a 3-box reversal back into X’s, the chart is approaching resistance at 19514 and 19710 (the black downslope line). A breakout past this resistance could target the 20207 level, just above the previous high. A move beyond this point might pave the way for resistance at 21669, based on a PNF count from the December column of X’s.On the other hand, if the index continues to decline, support would be found at 19003, 18565, and 17838, with longer-term support potentially appearing in the 16338-16226 range if a measured move develops. In the meantime, NASDAQ maintains a perfect SMAX score of 10/10, a proprietary SIA near-term reading that gauges relative strength against a basket of other asset classes.
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