Current trends in U.S. equities suggest a potential rebound for small-cap stocks later this week. The S&P 500 Index (SPX) and the Nasdaq-100 (QQQ) show signs of stabilization near key support levels, which may set the stage for a bounce in the market.
Market Performance Overview
Last Friday’s market reversal mirrored the previous week’s trends but failed to sustain momentum as of Monday’s close. Notably, November has historically been weak for equities, recording the worst returns since 2008 with eight trading days remaining.
Key Catalysts for Potential Rally
- Upcoming NVIDIA (NVDA) earnings are anticipated to influence market sentiment.
- A possible rebound in September payroll figures may also act as a catalyst for a rally.
Despite recent pressures on small-cap stocks and financials, analysts maintain that the current underperformance is likely temporary. The market remains bullish, especially if the October lows hold. This consolidation phase serves as an opportunity for investors to buy on dips.
Technical Analysis
The analysis indicates that the SPX is currently near its upward trend line established from the August lows. Although financial stocks exhibited bearish movements, NVIDIA seems to be holding steady ahead of its earnings report this Wednesday.
Many experts believe that if the SPX maintains its position above the November lows, it could signal a trend reversal. Historical performance suggests the importance of October lows in determining future market direction.
Market Sentiment and Future Outlook
Investor sentiment has turned notably negative for cryptocurrencies, which often lead equity movements. Polls from AAII and the Fear and Greed Index indicate widespread caution in the market, leading analysts to be skeptical of further downside volatility in November.
Investment Opportunities in Small-Cap Stocks
Small-cap stocks are projected to bottom out soon, especially after a period of underperformance. The iShares Russell 2000 ETF (IWM) has shown weakness compared to the equal-weighted SPX but remains under positive monthly momentum indicators.
Short-term declines may present buying opportunities, particularly as the Federal Open Market Committee (FOMC) is expected to cut rates in the near future.
Key Support Levels
| Index | Support Level | Resistance Level |
|---|---|---|
| SPX | 6631 | 6775 |
| NVDA | Upcoming Earnings | – |
| IWM | 51-51.50 | 2024 highs |
In conclusion, investors should look for small-cap stocks to rebound later this week, supported by key earnings reports and economic data. Although current pressures may seem concerning, they present potential buying opportunities in the market.
