Understanding the technical bias of the broader stock market does not necessarily tell you what an individual stock will do, but it does provide an important directional backdrop.
That is why I like to monitor both the S&P 500 and Nasdaq Composite for clues about the broader market bias. If both indices have a negative bias, individual stocks—especially technology and growth stocks—may face stronger headwinds. That does not mean every stock will move lower, but the broader market tide becomes less favorable.
Both indices are now trading near important support targets. If those levels hold, buyers could reemerge and generate a rebound. If they break, the technical bias would tilt more firmly to the downside. That increases the importance of these levels for both buyers and sellers.
- S&P 500: The index is currently down around 0.50%. The session low reached 7572.69, testing the bottom of a key swing area near 7573. The price has since bounced modestly and is trading near 7583, down 0.48% on the day. However, the price has not been able to move back above the top of the swing area at 7617.37. If buyers can reclaim that level and stay above it, the rebound could extend toward the 100-hour moving average at 7672.97. Conversely, a sustained break below 7573 would strengthen the bearish bias and increase the potential for additional selling.
- Nasdaq Composite: The index is currently down around 0.70%. The session low reached 25,949.48, taking the price below its 100-day moving average at 25,996 but keeping it above the next swing support level at 25,910. The price has since rebounded to around 26,000, just above the 100-day moving average. Buyers are trying to defend that support, but they still need to keep the price above the moving average to build confidence. A move back below 25,996—and especially below 25,910—would shift more control to sellers and open the door for further downside.
The lesson for traders is that support is not automatically a place to buy. It is an area where buyers have the opportunity to prove they can take control. A bounce from support is encouraging, but traders also want to see the price reclaim nearby resistance and stay above it. If support breaks and the price remains below it, that former support can become resistance.
In the video above, I take a closer look at the technical picture for both indices and explain the levels that will help determine whether buyers can generate a stronger rebound—or whether sellers remain in control.
This article was written by Greg Michalowski at investinglive.com.