Marching Onward: Market Bounces Back and Pushes Higher

Marching Onward: Market Bounces Back and Pushes Higher

The stock market experienced another significant catalyst when Tesla Motors Inc. (TSLA) announced that they would not be able to provide any updates on the much-awaited “Generation 3” vehicle. The announcement came from Tesla CEO Elon Musk after the market closed during the Investor Day event. His statement that answering any questions about the car would be “jumping the gun” immediately led to a drop of over 5% in Tesla’s stock price.

As the market opened, Tesla’s stock price continued to plummet, reaching over an 8% drop. It was inevitable that such a significant decline in a large-cap stock like Tesla would drag the market down, and that’s precisely what happened leading into the open.

The impact of Tesla’s announcement on the stock market was substantial, highlighting the importance of large-cap stocks in determining market direction. 

As the opening bell chimed, the stock market seemed to be headed towards a bearish scenario, with everything pointing towards a potential downturn, except for one missing piece that was highlighted in the previous Simpler article. The S&P 500 futures were trading below the 200-day Simple Moving Average (SMA), and the Nasdaq futures were trading lower. However, the missing piece was the Dow Jones futures, which continued to trade in positive territory, holding the market in place as it did the previous day.

The Dow’s resilience in the face of bearish indicators provided some relief to the market, preventing it from sliding further. However, eventually, the Nasdaq began to recover, and this, in turn, caused the S&P 500 futures to trade above the 200-day SMA.

This turn of events highlighted the importance of the Dow’s performance in shaping the market’s direction. While the market may face bearish signals, a strong performance by the Dow can provide the necessary support to keep the market afloat.

Bear Thesis Unravels As Bulls Take Over

The bear thesis had been dissected at this point, leaving room for the bull thesis to take over. S&P 500 futures reclaimed the 3,950 level, technology stocks recovered across the board, and the Dow continued to trade in positive territory. As this thesis unfolded, another catalyst helped spark the market to move higher as a Federal Reserve (Fed) speaker took the mic.  

Raphael Bostic, President of the Fed Bank of Atlanta, stated that he is “still firmly in the quarter-point move pacing.” As these words were spoken, indices exploded higher, sending the market soaring. Most of the remaining time in the cash session would be spent moving higher toward the psychological level of 4,000.

At the close of the cash session, the first sign of resistance came at 4,000. Moving to Tomorrow’s session, this 4,000 level will play a pivotal role as the line in the sand to gauge sentiment to end the week. 

Scenarios to Watch for to End the Week

If the S&P 500 futures can establish themselves above the 4,000 level, a few targets above would be the current high point of the week at 4,024.75. Above that, critical levels include the 21-day Exponential Moving Average (EMA) at 4,033 and the 15-day SMA at 4,050.

On the downside, if the market continues to struggle at the 4,000 level, it would make sense to revisit the 200-day SMA at 3,950. Another reason this is a solid price target to the downside is that the Point of Control (POC) has recently relocated to 3,952 on the S&P 500 futures. 

Fed Speakers and Economic Events

Tomorrow there will be several Fed speakers. The Dallas Fed President will speak at 11 a.m. Eastern, followed by Fed Gov. Michelle Bowman at 3 p.m. Eastern. 

Outside of Fed speakers, the Institute for Supply Management (ISM) Services report will be at 10 a.m.

Market Rallies in Efforts to Recover 

The Nasdaq and the S&P 500 were positive to close the session. The S&P 500 futures closed up 0.71%, gaining 27 points, while the Nasdaq futures closed up 0.74%, adding 89 points. The Dow Jones futures led the way, closing up 0.97%, an additional 320 points.