The Bottom Line:
- The market bounced back from yesterday’s bearish price action, with Google, Microsoft, and NVIDIA semiconductors seeing red, while Healthcare and Industrials sectors performed well.
- The S&P 500 (SPY) lost the daily 50-moving average, but the weekly structure remains intact, leaving room for a weekly higher low.
- The Nasdaq still has room for a weekly higher low, while the Russell 2000 (IWM) is developing a daily equilibrium pattern and needs to break above 224 to continue its bullish momentum.
- Cryptocurrencies, including Bitcoin and Ethereum, are facing selling pressure, with Ethereum’s decline more pronounced following the ETF launch.
- Sector-specific insights, such as the double-top patterns in XLF and XLV, and the potential for a daily higher low in Mara, provide trading opportunities for savvy investors.
Market Rebounds with Sector Rotation
Sector Rotation Drives Market Recovery
The market rebounded strongly on Thursday, July 25th, after the previous day’s bearish price action. The heat map revealed strength in Google, Microsoft, and NVDA, while semiconductors experienced some weakness. Healthcare and Industrials sectors were notably green, contributing to the overall market recovery.
Key Indices Hold Support Levels
The S&P 500 (SPY) managed to close right on the daily 50-day moving average, while the E-mini S&P 500 futures (ES) showed a slightly more exaggerated downside move. However, the weekly structure remains intact, providing room for a potential higher low. The NASDAQ and Russell 2000 (RUT) also held their weekly structures, with the latter forming a daily equilibrium pattern.
Cryptocurrencies and Commodities React
Bitcoin experienced a 1% decline but found support at the daily 50-day moving average, presenting a crucial moment for the crypto bulls. Ethereum, on the other hand, saw a more significant pullback following the ETF launch earlier in the week. The US Dollar bounced from the daily 200-day moving average, while oil prices found support at the same level and closed with a potential hourly bull flag.
S&P 500 Maintains Weekly Structure
S&P 500 Maintains Weekly Structure
The S&P 500 (SPY) lost the daily 50 moving average, with a candle body close right on it. The E-mini S&P 500 futures (ES) showed a slightly more exaggerated move to the downside. However, on the weekly timeframe, the index remains fine, with plenty of room for a weekly higher low. Although the elevated bear volume is not ideal, the bulls have not broken down the weekly structure.
NASDAQ and Russell 2000 Hold Their Ground
The NASDAQ also has room for a weekly higher low, as it has not broken down its weekly structure. On the daily timeframe, the index is approaching oversold levels. The Russell 2000 (RUT) had a nice bounce and is developing a daily equilibrium. The iShares Russell 2000 ETF (IWM) has been putting on a bull show for a while, with three upper wicks at the 224 level. Until this level is surpassed, traders can continue to short it until it stops working.
Dow Jones and Volatility Index React
The Dow Jones Industrial Average was slightly green and still has enough room for a daily higher low. It held the prior day’s low by just $2, an impressive feat followed by a bounce. The Volatility Index (VIX) finally chilled out after the previous day’s big move, with a long lower wick indicating bulls buying the dip. However, it could potentially form a 4-hour bull flag.
Nasdaq Seeks Higher Low
Nasdaq Finds Support at Key Moving Averages
The Nasdaq Composite Index experienced a bounce after finding support at crucial moving averages. On the daily timeframe, the index is approaching oversold levels, suggesting a potential rebound. The weekly chart shows that the Nasdaq still has room for a higher low, as the overall structure remains intact.
Semiconductor Stocks Show Mixed Performance
Semiconductor stocks had a mixed day, with the VanEck Semiconductor ETF (SMH) trading near its weekly 26 exponential moving average (EMA) in a weekly downtrend. The elevated volume in the sector today suggests potential volatility in the coming sessions. Advanced Micro Devices (AMD) continued to face pressure, with its daily bear flag confirming yesterday and following through today. The company is set to report earnings next Tuesday.
Tech Giants Navigate Market Volatility
Technology giants had a varied performance during the market bounce. Apple (AAPL) managed to reach a new high of day but set an hourly lower high, putting the 4-hour lower high on the table. Amazon (AMZN) remained in a daily downtrend and rejected the hourly 50 moving average multiple times. The company is scheduled to report earnings next Thursday after hours. Google (GOOGL) continued to experience weakness from yesterday’s negative earnings reaction, reaching a new lower low on the day. Microsoft (MSFT) also faced heavy selling pressure but held its low of day at $247.51 going into the close.
Cryptocurrency Faces Selling Pressure
Bitcoin Struggles at Key Moving Average
Bitcoin, the leading cryptocurrency, faced selling pressure and declined by 1%. The digital asset is currently trading at the daily 50 moving average, a crucial level that will determine the next move for the crypto bulls. A decisive break below this support could lead to further downside, while holding above it may encourage buyers to step in.
Ethereum Lags Behind Bitcoin
Ethereum, the second-largest cryptocurrency by market capitalization, experienced a more significant pullback compared to Bitcoin. The recent launch of the Ethereum ETF seems to have been a “sell the news” event, with investors taking profits following the announcement. Despite the current weakness, Ethereum still has plenty of room for a weekly higher low compared to the $2,894 level.
Altcoins Follow Suit
As Bitcoin and Ethereum faced selling pressure, altcoins followed suit. The overall cryptocurrency market cap declined, with many individual coins experiencing significant losses. The 15-minute exponential moving averages (EMAs) guided prices lower throughout the day. Coinbase (COIN) shares also felt the impact of the crypto weakness, with a potential gap fill at $222.15, just $4 away from the current trading price.
Sector-Specific Trading Opportunities
Tesla Outperforms the Market
Tesla (TSLA) experienced a strong bounce, outperforming the broader market. The stock formed a clear double top at $225.99 and $226.00, providing an excellent opportunity for bears to capitalize on the subsequent decline. The stock fell nearly $7 after the double top formation, rewarding traders who recognized the pattern.
Financial and Healthcare Sectors Show Mixed Results
The Financial Select Sector SPDR Fund (XLF) formed a double top at $43.37 and $43.39, leading to a close at the low of the day. The weekly chart shows room for a potential higher low, but last week’s upper wick is a concern. The Health Care Select Sector SPDR Fund (XLV) also formed a double top at $151.33 and $151.53, closing down at the low of the day.
Small-Cap Stocks and Crypto-Related Equities
The SPDR S&P Regional Banking ETF (KRE) is being watched closely alongside the Russell 2000, as it formed a double top yesterday but experienced follow-through on the bull break today. There is ample room for a weekly higher low on a pullback. Crypto-related stocks, such as Marathon Digital Holdings (MARA) and Riot Blockchain (RIOT), remain on the radar for potential daily higher lows, with MARA looking for support at $18.78 and RIOT forming a daily lower low amid crypto weakness.
