Top Charts of the Week: Key Market Trends and Sector Insights

This week, the S&P 500 and Nasdaq are hovering above crucial support levels. The Nasdaq has increased by approximately 70 points, maintaining its position above the critical 20,000 mark, while the S&P has risen by about 6 points, showing signs of stabilizing around the 5,640 level. Although recent selling pressure has eased, there is little evidence that investors are ready to buy the dip. If this reluctance continues, it could lead to a deeper market correction. As earnings season progresses, it will be interesting to see if the current momentum persists, potentially reaffirming the fundamental strengths that have made tech stocks favorable.

Wednesday was marked by significant market activity. The Nasdaq Composite suffered its worst day in nearly two years, falling 2.8% due to a sharp rotation out of technology stocks. The S&P 500 also declined by 1.4%, while the Dow Jones Industrial Average bucked the trend, rising 0.6% and setting a new record. This divergence, where the Dow gained while the S&P 500 fell more than 1%, was the first occurrence since 1999. This divergence underscores the volatility and sector rotation currently influencing the market.

Chart Analysis

1. iShares Russell 2000 ETF (IWM)

IWM appears to be in a strong bullish trend, with several technical indicators pointing to continued upward momentum.

• Trend Analysis: The 200-day moving average is upwards sloping, and the MACD histogram is above zero, indicating bullish momentum.

• Comparative Relative Strength: IWM is outperforming the S&P 500.

• Momentum: The 14-period Slow Stochastic oscillator is above 80, indicating overbought conditions. This suggests that investors have been actively purchasing shares and driving the price higher.

• Volume: The last 10 days have seen significant volume, with average daily volume above the average for the past year. Today's volume is no exception, with 25,337,247 shares traded so far.

• On Balance Volume (OBV): The OBV indicator is bullish, with a positive slope suggesting that buyers are presently more active than sellers.

• Bollinger Bands: The Bollinger Bands are wider than usual due to higher volatility, which often precedes a pause or reversal in the near-term trend.

2. Advanced Micro Devices (AMD)

AMD appears to be in a bearish medium-term trend within a longer-term uptrend. While the stock has shown strength in the long term, short-term indicators suggest bearish momentum.



• Trend Analysis: The 200-day moving average is rising, but the MACD is bearish.

• Comparative Relative Strength: Despite current bearishness, AMD is outperforming the S&P 500 in the long term.

• Momentum: The 14-period Slow Stochastic Oscillator is falling, indicating that investors are selling shares and driving the price lower.

• Volume: Today's volume is on track to be heavier than usual, with 44,022,603 shares traded so far.

• On Balance Volume (OBV): The OBV indicator is bearish, with a negative slope suggesting a lack of buying interest.

• Bollinger Bands: The Bollinger Bands are wider than usual, indicating high volatility that might lead to a near-term pause or reversal.

3. Eli Lilly and Co (LLY)

LLY appears to be correcting within a longer-term bullish trend. Despite some short-term bearish signals, the overall trend remains positive.



• Trend Analysis: The MACD is presently below the signal line, but shares remain 19.7% above an upwards-sloping 200-day moving average.

• Comparative Relative Strength: LLY is outperforming the S&P 500.

• Momentum: The 14-period Slow Stochastic Oscillator is falling, as investors sell shares and drive the price lower.

• Volume: Today's volume is on track to be heavier than usual, with 4,745,420 shares traded so far.

• On Balance Volume (OBV): The OBV indicator shows that longer-term accumulation has given way to near-term selling pressure.

• Bollinger Bands: The Bollinger Bands are of normal width, indicating that volatility is in line with the norm for this stock.

Conclusion

This week's charts reveal a mixed picture of the market. The S&P 500 and Nasdaq are holding above key support levels, indicating some stabilization. However, investor reluctance to buy the dip could lead to further corrections. The divergence observed on Wednesday, where the Dow Jones rose while the S&P 500 and Nasdaq fell, highlights the current volatility and sector rotation.

• IWM: $IWM(IWM)Strong bullish momentum and high volume indicate continued upward potential, though increased volatility may suggest a pause or reversal soon.

• AMD: $AMD(AMD)Bearish short-term indicators within a longer-term uptrend suggest caution, with high trading volumes and declining OBV pointing to selling pressure.

• LLY: $LLY(LLY)While currently correcting, LLY's longer-term bullish trend and relative strength outperforming the S&P 500 indicate potential resilience.

As earnings season unfolds, these trends will be critical to watch, particularly for tech stocks, which remain under the spotlight. Investors should remain vigilant, closely monitoring these key indicators to navigate the evolving market landscape.