Vanishing Bounces, Soaring Volatility: Is the Market About to Break?

Overall, the week's trading activity reflected a market grappling with uncertainty, resulting in high volatility and a lack of clear directional trend.

This week in the US stock market was marked by a mix of cautious optimism and lingering concerns. Several major indices experienced major intra-week fluctuations, influenced by a combination of factors including economic data releases (macro) and corporate earnings reports.

The Macro Side

The ADP National Employment Report, which precedes the official government jobs report, showed stronger-than-expected private sector job growth. This initially boosted market sentiment, suggesting a robust labor market and investors interpreted it as a sign of economic resilience.

However, the official Nonfarm Payrolls report released on Friday painted a slightly different picture. While job growth was still positive, it fell short of economists' forecasts. This tempered some of the initial enthusiasm generated by the ADP report.

The employment data is crucial for the Federal Reserve's decision on interest rates. While the data suggests a still-healthy labor market, the fact that job growth missed forecasts could give the Fed some room to potentially slow down the pace of rate hikes or even pause them altogether.

Economic Outlook: The employment situation is a key indicator of the overall economic outlook. While job growth remains positive, the slight miss could signal some moderation in economic activity.

The Corporate Earnings Side

This past week saw a trio of major earnings reports. Google (GOOG) slightly beat revenue expectations, driven by continued strength in Search and YouTube, but Cloud growth slowed, raising some concerns. Palantir (PLTR) impressed with strong earnings, driven by increased adoption of their AI platform. Their guidance also exceeded expectations, fueling optimism about the company's future growth prospects. Overall, the reports painted a picture of some sectors thriving while others faced headwinds, reflecting the complex economic landscape. PLTR is not a Mag 7 company, but +34% gain for the week is strong enough to influence the SPX and market sentiment.

Amazon (AMZN) delivered a mixed bag. While their e-commerce business showed signs of recovery and AWS continued its growth trajectory, operating expenses remained a point of focus, the stock price fell triggering a first sign of a market pullback for Friday; but the economic data was the major trigger and price action anticipated that possibility on Thursday.

From the Previous Weekly Compass

Last week's analysis anticipated that SMH's bearish move was nearing completion. As expected, the price continued down to $233.4 (bearish target), where oversold conditions triggered a bounce.

Bearish outlooks for Dow Jones, reaching with precision the bearish target $44,029.2, SPX pulled back as expected, reaching the $5920 level that was suggested as a serious consideration, NDX also reached the bearish target $21,019 with impressive precision. The intra week bounce that faded will be analyzed below.

TLT continued its anticipated rebound (70% probability), while GLD consolidated its uptrend and SLV continued its upward trajectory, albeit with some minor fluctuations as previously noted. As predicted, GOOG, along with AAPL, MSFT, and AMZN, closed the week in negative territory. It was stated last Saturday for Amazon: "the odds for a bearish resolution are high" and this proved accurate.

AAPL neared its $224 bearish target and price action is trying to consolidate above the key annual line charted.

This publication also anticipated TSLA's decline, which occurred more rapidly than initially projected, triggered by the breach of the $400 psychological level. NVDA's price action reached its bearish target with precision, followed by the anticipated short squeeze.

Contrary to expectations, PLTR and META did not consolidate. PLTR surged following impressive earnings and guidance (similar to NVDA in 2024), while META, with strong earnings continued moving up reaching its charted annual level.

My warnings of a decline for Bitcoin materialize more and more every week. Euphoric rallies require consolidation and healthy pullbacks. While the mid-December top call was temporarily invalidated by the inauguration rally, the pattern has reasserted itself, resulting in two consecutive weeks of declines. Remember: The Bitcoin bounce was anticipated in September in this publication, as the one for TSLA in October, both with clear technical references; those references are reversing, today’s analysis are a must read.

For IWM, the forecast was "Hiccup ahead before a potential bounce," with a $223.9 target. Price action indeed bounced from $221, the second support level.

This publication provides weekly coverage, every Saturday, of the following securities: SPX, NDX, DJI, IWM, SMH, TLT, NVDA, META, MSFT, AMZN, GOOG, AAPL, TSLA, PLTR, GLD, SLV, and Bitcoin. If you trade any of these, this publication is designed for you. Technical charts and price targets are presented below, MSTR is also included today.

Subscribe now to benefit from professional insights, especially during volatile market conditions. SmartReversal’s track record demonstrates the ability to anticipate both broad market reversals and individual bullish moves, providing valuable context for informed trading decisions. Don't wait until market conditions worsen to subscribe.

SPX