The indices were unable to reclaim the 200-day moving average, with the broader downtrend continuing to gain momentum.
The S&P 500 saw a modest bounce attempt on Monday following headlines around potential negotiations between Iran and the U.S., but the move lacked conviction and failed to reclaim any key moving averages. Price was quickly sold into, with Tuesday and Wednesday showing indecisive action before a sharper sell-off into Thursday and Friday to close the week.
Notably, the 50-day moving average has begun to decline steeply and has now crossed below the 100-day — a sign of increasing downside momentum.
The Nasdaq (QQQs) followed a similar pattern, with a weak early bounce, midweek indecision, and a late-week sell-off. Relative to other indices, QQQs continue to show the most weakness.
The Russell 2000 (IWM) also saw a shallow bounce on Monday, but did show slight follow-through midweek before rolling over with the broader market. Importantly, IWM has managed to hold the 200-day moving average and remains above last week’s low, potentially forming a higher low. While this is not yet confirmed, it does suggest relative strength compared to large caps.
Themes in Play
LITIUM (LIT)
Saw a solid rally early in the week, reclaiming the 50-day moving average and holding up well during the broader market sell-off. Still within a longer-term base, but showing relative strength.
SOLAR (TAN)
Continues to form a constructive base with higher lows and a tightening range. Holding up well relative to the indices.
SPACE (UFO)
Pulled back with the broader market but remains within its longer-term base structure. Relative strength still intact.
SEMICONDUCTOR (SMH)
Experienced a broader pullback this week, though there are still several individual names within the sector displaying relative strength.
OIL
Broke out of a flag formation late in the week amid broader market weakness. While price seems extended, the geopolitical nature of the move makes conviction around price level less clear.
AEROSPACE/DEFENCE (ITA)
Has sold off aggressively alongside the broader market, recently losing the 150-day moving average. A market bounce could present potential short-side opportunities.
Stocks Displaying Strength
As market conditions weaken, tracking relative strength becomes increasingly important.
RYAM
Tight consolidation following a strong move pre- and post-earnings. Could see expansion from this range.
SATL
~80% move over five days on heavy post-earnings volume. Extended short term but worth monitoring.
Software
DOCN
Strong rally through March, now forming a base. Slightly extended short term.
FSLY
Up ~70% since earnings, continuing to trend strongly. Extended but remains a leader.
PAYS
Large earnings-driven move on record volume. Extended but worth watching for future setups.
Semiconductors
AAOI
Consolidating after a strong earnings gap. Attempted breakout this week but failed with market weakness.
LWLG
Continuing to form higher lows after its earnings move. Breakout attempt was disrupted by broader selling.
AXTI
Up ~70% over the past month despite market weakness. Potentially extended short term.
DELL
Strong earnings gap on heavy volume with follow-through. Currently extended.
Alternative Energy
ALTO
Consolidating after a large earnings-driven move. Watching for potential expansion if conditions improve.
SEDG
Strong relative performance, currently pulling back to the 10-day while forming a constructive base.
BW
Significant earnings-driven move followed by continued strength. Appears to be forming a flag.
Key Observations
This week showed a continued increase in selling pressure, with even positive geopolitical developments failing to generate sustained upside. The inability to reclaim the 200-day moving average suggests that buyers remain cautious at current levels.
One notable characteristic has been the difference in candle structure:
- Up days continue to show indecision (long upper wicks)
- Down days show conviction (closing near lows)
This imbalance reinforces the idea that sellers currently have control.
Another key observation is the relative strength in small to mid caps. While not bullish, IWM has held key levels better than both the S&P 500 and Nasdaq, which have already broken prior lows. This divergence is worth monitoring.
Focus for the Week
I feel that price action this week could likely mirror prior weeks, with an early week bounce attempt followed by a late week sell off. Given how extended the market is to the downside, a short-term bounce would not be surprising. However, the broader trend remains weak, favouring day trading or very short term swing positions.
This week I will be:
- Tracking relative strength names for potential opportunities on a market bounce
- Watching for a bounce to potentially set up short-side opportunities in ITA