Nasdaq Tests 200-Day MA, S&P 500 Holds Firm as Russell 2000 Breaks Weekly Trend

Published 03/03/2025, 03:37 pm

Friday's Oval Office meltdown points to a future of nuclear proliferation. How markets react to this and the long-term prospects for the U.S. remain to be seen, but it's not good for either nation if the impasse continues. Will China step in and offer a deal to Ukraine in exchange for security?

Will Russia eventually take it all in the absence of U.S. military aid? Can UK and Europe offer a plan that holds the stasis quo until European forces are in a position to resist? Markets may not react at all, but sellers are in a position to advance their position off the back of this uncertainty.

The Russell 2000 (IWM) broke below support of the rising channel on the weekly time frame; although on the daily time frame it managed to dig in its nails at support.

On a more positive note, the index was able to find support at the 50-week MA despite the close outside the rising channel.

IWM-Weekly Chart

The Nasdaq finished last week with a bullish piercing pattern following a successful test of the 200-day MA on higher volume accumulation. While this may be good enough for a rally to mount a challenge of its 50-day and/or 20-day MA, it will be a bigger challenge to get past 20,000.

Nasdaq Composite-Daily Chart

The S&P 500 also enjoyed a significant bullish piercing pattern coming off a mid-level support. The index has come close to retracing the entire trading range following the February 'bull trap'. On the flip-side, technicals are net bearish.SPX-Daily Chart

Other areas to watch are Nasdaq Breadth Metrics. The Percentage of Nasdaq Stocks Above Their 50-day MA has slipped to its low of 30%.

NAA50R-Daily Chart

Nasdaq Bullish Percents have made a new swing low on net bearish technicals.

BPCOMPQ-Daily Chart

And the Nasdaq Summation Index is approaching the sixth month of its bearish divergence on net bearish divergences.

NASI-Daily Chart

None of these breadth metrics are good news for the Nasdaq in the long term, and we are long overdue for a move below its 200-day MA despite Friday's successful test.

The one potential bright spot for this week could be the Dow Industrial Average. There was a large bullish engulfing pattern that returned the index above the 50-day MA on higher volume accumulation.INDU-Daily Chart

Let's see what the week brings...

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