Last week the stock market had a quiet week as investors continued to weigh good news against bad news. On the bright side, there was another positive economic report released that showed inflation continuing to moderate. However, this was tempered with renewed banking and debt ceiling fears.
When there’s mixed economic data and media headlines, I dig a little deeper to find clues as to which narrative will likely have more impact on the stock market. A good test is whether the market can break through a strong resistance level, which recently has been around 4200 for the S&P 500 and 12,270 for the Nasdaq. Since the start of the 2nd quarter, the S&P hasn’t been able to break through this level, which is negative, but it also hasn’t dropped much below it, which is positive. The S&P seems to be in a wait-and-see holding pattern and doesn’t give us a strong indicator of where it’s going next. On the other hand, the Nasdaq has quietly pushed above its resistance area to 12,376 which indicates it’s breaking through this level and that is very positive.
The Nasdaq has been the best performing major stock index this year, so it makes sense that it’s breaking through a resistance level before the S&P 500. It’s also a clue pointing to the likelihood that the rest of the stock market will follow the Nasdaq’s lead in the coming weeks.
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