Another Month, Another Wave of Selling in the Stock Market

Another Month, Another Wave of Selling in the Stock Market

Yesterday’s stock market session ended with a high volume of sales, which was primarily caused by Nvidia (NVDA) due to an announcement the company made. Nvidia declared that it would apply for a mixed-shelf offering worth up to $10 billion. This means that the company plans to sell securities, including common stock, in order to raise the said amount. While the company did not specify the reason behind the offering, the market sentiment was negatively affected by the selling at the end of the session.

After a significant decline at the end of yesterday’s session, there was a gradual increase in the indices overnight, leading up to the opening of the cash session. However, the upward movement was halted by the psychological barrier of 4,000 in the S&P 500 futures, which suggests that certain players are currently in control of the market.

Small Pop Gets Quickly Engulfed

At the opening bell, Nvidia and Tesla Motors Inc. (TSLA) started off by rapidly declining. Although there was an overnight attempt to push the market higher, the technology sector brought down the market. As the S&P 500 futures approached the 200-day Simple Moving Average (SMA), a significant amount of selling pressure began to build up. Fortunately, the market was able to avoid a complete collapse as it found support at the 200-day SMA at the beginning of the month.

Throughout the remainder of the trading session, the indices remained within a narrow range, with the high of the range being the day’s opening drive and the low being the 200-day SMA hold. Most of the trading session occurred below the Volume Weighted Average Price (VWAP). As noted before, on days when the market is range-bound, VWAP can be a useful tool to determine which group is in control, despite the market appearing to make little progress.

Bull and Bear Cases Moving Forward

The market has shown resilience at the 200-day SMA level over the past few sessions, and there are different ways to interpret this. One way is to see it as the formation of a bottom, as the market exhibits enough strength to maintain this level. In order for this theory to hold true, the S&P 500 futures must continue to trade above the 3,950 level. If the market remains above this level, an upward move is possible, especially since the Nasdaq dominated today’s price action. For a bullish scenario to play out, we would need to see technology stocks recover and the S&P 500 futures stay firmly above 3,950.

Alternatively, the bearish scenario appears to be the path of least resistance. The market has faced negative catalysts, with the most recent one being the NVDA stock offering. NVDA’s decline has not helped the Nasdaq and may continue to push it lower in the coming days. In order for the bearish scenario to materialize, we would need to see weakness in the Nasdaq persist, S&P 500 futures trading below the 200-day SMA, and the Dow Jones futures following suit with increased selling pressure.

The reason the Dow Jones will be crucial in a bearish scenario is that it closed positively today. For a significant move to occur, all indices must align in the same direction.

Economic Events and Tesla 

Today, after the close, Tesla will be hosting their Investor day. This event will hold the possibility to move the market in the coming days. 

Tomorrow, at 8:30 a.m. Eastern, weekly Initial Jobless claim numbers will be released. 

Market Goes Red to Begin Month 

The Nasdaq and the S&P 500 were negative to close the session. The S&P 500 futures closed down 0.48%, falling 20 points, while the Nasdaq futures closed down 0.93%, declining 111 points. The Dow Jones futures fought to close green, up 0.30%, adding 10 points.