Did Nvidia just break the S&P 500’s winning streak? 📉

On August 20, 2024, the S&P 500 experienced a notable shift in momentum as it ended its longest winning streak of the year. After eight consecutive days of gains, the index fell by 0.2%, marking the first decline in over a week. This event was significant, given the streak’s length and the broader market’s reliance on the S&P 500’s upward trajectory.

Nvidia’s Stock Volatility and Its Impact on the Market

A key factor in the S&P 500’s downturn was the unexpected volatility in Nvidia’s stock. Nvidia, a company that had been a driving force behind the market’s recent gains, saw its stock price dip on this day. The tech giant’s performance has a considerable influence on the S&P 500, and its sudden decline played a pivotal role in dragging the index down. Investors who had previously been buoyed by Nvidia’s impressive run were met with uncertainty, contributing to the day’s overall market downturn.

Anticipation of Federal Reserve Chair Jerome Powell’s Speech

Adding to the market’s cautious tone was the anticipation of an upcoming speech by Federal Reserve Chair Jerome Powell, scheduled for later in the week. Investors were keenly aware that Powell’s remarks could provide critical insights into the future of monetary policy, particularly in the context of interest rate decisions and inflation management. This anticipation created a sense of unease, leading to restrained trading activity as market participants awaited further clarity from the Fed.

SPY Technical Analysis (daily)

This chart displays the daily performance of the S&P 500 SPDR (SPY) ETF over the past year. Key elements such as moving averages, Fibonacci retracementFibonacci retracement is a fundamental tool in the arsenal of technical analysts and traders. Rooted in the mathematical principles of the Fibonacci sequence, this technique is wid... More levels, and various technical indicators are used to analyze the trend.

Starting with the price action, the SPY has been in an overall uptrend, consistently making higher highs and higher lows. The chart shows a recent pullback, with two significant corrections marked on the chart—one around early April 2024, with a decline of 5.88%, and another in mid-July 2024, with a larger decline of 9.50%. Despite these corrections, the price has found support and is now trading near $558.70, just below its previous peak.

Support and resistance levels are identified by the Fibonacci retracement tool. The price respected the 38.2% retracement level around $505.87 and found support near the 50% level at $487.55 during the July correction. The 61.8% retracement level at $469.24 also acted as strong support in prior corrections. Resistance is noted near the 23.6% level at $528.53, which aligns with the previous highs.

The 50-day moving average (around $548.74) is currently below the price, acting as support, while the 200-day moving average (around $508.52) is providing long-term support, indicating the overall bullish trend remains intact.

Volume analysis shows a moderate increase in trading volume during the July correction, but it hasn’t spiked significantly, which could imply that the selling pressure was not overwhelming.

The Relative Strength IndexIn the world of technical analysis, the Relative Strength Index (RSI) stands as a cornerstone tool for traders seeking insights into market momentum. Developed by J. Welles Wilder ... More (RSI) is at 61.67, indicating a neutral to slightly bullish momentum. It is not in the overbought territory, suggesting that there could be room for further upside.

The On-Balance VolumeThe On Balance Volume indicator (OBV) is a technical analysis tool used to measure the flow of money into and out of a security over a specified period of time. It is a cumulative ... More (OBV) line has been relatively stable, which shows that accumulation and distribution are balanced. This stability further supports the idea of a potential continuation of the uptrend.

The Stochastic RSIIn the realm of technical analysis, the Stochastic RSI (StochRSI) emerges as a powerful tool for traders seeking to navigate market dynamics with precision. Developed by Tushar S. ... More is at 0.973, indicating a near overbought condition. This could mean a short-term pullback is possible, but it’s not definitive.

The Chaikin OscillatorNamed after its creator Marc Chaikin, the Chaikin Oscillator stands as a formidable tool in the arsenal of technical analysts. This oscillator is designed to measure the accumulati... More is at 66,412,586, indicating money flow is positive, which aligns with a bullish outlook.

The MACDThe MACD indicator is essentially a momentum indicator that shows the relationship between two different moving averages of price. The MACD is the difference between the 12-period ... More (Moving Average Convergence Divergence) shows a bullish crossover with the MACD line above the signal line, but the histogram indicates weakening momentum as the lines converge, suggesting caution.

Time-Frame Signals:

• 3 Months: Buy – The overall uptrend remains intact, supported by positive money flow and bullish technical indicators. Potential for price to retest and break previous highs around $580.
• 6 Months: Hold – While the uptrend is intact, the market may face resistance near the previous highs. Potential for consolidation before further gains.
• 12 Months: Hold – Longer-term, the market could continue its uptrend, but watch for signs of significant corrections or a shift in momentum, especially if key support levels near $505 and $469 are breached.

In conclusion, the chart suggests a continuation of the uptrend with caution due to possible short-term corrections. The overall outlook is bullish, supported by strong support levels, positive money flow, and stable volume patterns.

SPY Technical Analysis (weekly)

This weekly chart of the S&P 500 SPDR (SPY) ETF highlights the market’s performance over a longer time frame. The chart shows a strong upward trend, characterized by higher highs and higher lows, despite some significant corrections.

Key support and resistance levels are outlined by the Fibonacci retracement levels. The 38.2% retracement level at $505.87 has been a key area of support, holding up well during recent pullbacks. The 50% level at $487.55 also provided strong support during corrections in early 2024. The 23.6% level at $528.53 is acting as a near-term resistance, with the price currently trading just above it. The 0% level at $565.16 represents the all-time high and serves as a significant resistance level.

Moving averages play a crucial role in this analysis. The price is well above the 40-week Exponential Moving Average (EMA) at $518.81, which indicates a strong uptrend. The 150-week EMA at $455.71 provides long-term support, far below the current price, suggesting the overall bullish structure remains robust.

Volume analysis shows consistent trading activity with no extreme spikes, suggesting steady participation in the market. The On-Balance Volume (OBV) line is steadily rising, indicating accumulation and supporting the bullish trend.

Time-Frame Signals:

• 1 Year: Buy – The trend remains bullish, with the price above key moving averages and Fibonacci support levels. There’s potential for the price to retest the all-time high around $565 and possibly break above it.
• 2 Years: Hold – While the uptrend is likely to continue, the market may experience periodic corrections. Long-term investors should remain cautious as the market approaches resistance levels.
• 3 Years: Hold – Over this extended period, the market could continue its uptrend, but watch for significant corrections or a potential trend reversal, especially if the price falls below key support levels such as $505 and $487.

In conclusion, the chart suggests a continuation of the uptrend in the longer term, supported by strong technical indicators and positive volume patterns. However, caution is warranted as the market approaches key resistance levels and given the potential for periodic corrections.

Past performance is not an indication of future results, and this article should not be considered as investment advice. Always conduct your own research and consider consulting with a financial advisor before making any investment decisions. 🧡

Looking Ahead

The decline of the S&P 500 on August 20, 2024, marked the end of an impressive eight-day winning streak, largely influenced by Nvidia’s stock volatility and investor caution ahead of Federal Reserve Chair Jerome Powell’s upcoming speech. The day’s events underscored the delicate balance of market forces and the impact of key economic factors on investor sentiment. As the week progresses, market participants will likely continue to monitor developments closely, especially in relation to Powell’s comments and their implications for future market movements.