This week, all the attention will be on the Fed’s decision, but the market had its own significant finish last week. Triple witching options expiration combined with a sell-off put the S&P 500 and the Nasdaq in a bit of trouble.
The S&P 500 managed to move above its 50-day moving average on Thursday, but by Friday’s close, it had dropped back below that level. Friday’s selling, combined with the high volume from triple witching, suggests some distribution.
SPX Daily Chart
The Nasdaq also dipped below its 50-day moving average on higher volume. It triggered a MACD “sell” signal and an On-Balance-Volume “sell” signal. Slow stochastics are still holding at the bullish mid-line, but there is limited room for further weakness in this indicator. Additionally, the Nasdaq is starting to underperform compared to the S&P 500, which is something to keep an eye on.
Nasdaq Composite Daily Chart
The Russell 2000 is currently around its 200-day moving average and is also showing signs of distribution. However, unlike the other indices, the technical indicators for the Russell 2000 are overall bearish, which is concerning if there is a support break.
IWM Daily Chart
As we look ahead to next week, it will be important to see how the market reacts to the Fed’s decision, particularly in terms of support levels. If there are no support breaks, especially for the Russell 2000 (IWM), then the Fed decision may not have a significant impact.
