The market ended a very eventful weak in a continued correction. A follow-through day on Wednesday after the Fed policy announcement failed immediately on Thursday as the NASDAQ Composite reversed back below its 50-day moving average in bearish fashion.
The S&P 500 Index simultaneously ran into resistance along its prior highs along the 4700 level and reversed hard on Thursday as volume expanded. The action has a decidedly bearish tone as leading stocks among big-stock NASDAQ names begin to come loose.The Market Direction Model (MDM) switched to a SELL signal on Tuesday, December 14th.
If the market commences a second leg down in a continuing correction, then we would keep a close eye on what we refer to as the "NASDAQ 6," the six stocks that together account for more than 49% of the total NASDAQ 100 Index weightings. Four of these, Apple (AAPL), Alphabet (GOOG), Microsoft (MSFT) and Nvidia (NVDA) also account for 70% of the S&P 500's performance in 2021. As these stocks go, so goes the market. If the NASDAQ 6 and other big-stock leaders such as several semiconductor names like Advanced Micro (AMD) and Qualcomm (QCOM), for example continue to break down then this will work in favor of any positions in inverse QQQ ETFs like the SQQQ or PSQ taken as a result of Tuesday's MDM sell signal.
This remains an extremely difficult environment as the big-volume move to the upside on Wednesday followed by the immediate and substantial reversal to the downside on Thursday demonstrates. The critical reference this coming week as we head into the Christmas holiday weekend will be whether the S&P 500 can hold near-term support at its 50-day moving average and perhaps serve as the dividing line between a Dead Santa Bounce/Melt-Up or a Christmas Chrash.