Stock Market Prep – This Week is Make or Break for Stocks

This week could make or break the stock market through the end of this year. The stock market is holding on to a long-standing support level, but just barely. If we bounce and go higher, there’s a very good chance we’ll hit new all time highs by the end of the year, especially once the Santa Clause Rally starts up. But if we fall and close below this support level, we could be looking at a rapid and deep sell-off in the markets, possibly hitting a correction by year’s end, and a bear market by the end of January.

Market Recap

Despite what felt like a massive sell-off in stocks last week, the S&P 500 actually finished the week up 0.14%. The NASDAQ was down 0.14%, and the DOW was up 0.41%. That’s about as close to a flat week as you can get. And while I wish this meant the market was uncertain and might actually rise, some of the technical indicators say otherwise. More details on that in the Technical Analysis section of this newsletter.

Looking at the larger overall stock market, the Russell 2000 was full on bearish. It not only finished the week down 1.7%, it also formed a death cross on the MACD. While it’s a bit uncertain what the large mega-cap stocks will do this week, the Russell 2000 looks to continue its bearish slide downward.

And if you think the Russell 2000 is bearish, just wait until you see the crypto charts. Bitcoin is in a full on bear market, down 26% from highs reached last month. And with the monthly MACD having now officially formed a MACD death cross, the sell-off in crypto looks like it’ll continue for some time. My analysis and trading suggestions from last week remain in place, and I continue to call for a $55,000 bottom in Bitcoin sometime next year.

Market Sentiment

Even though the stock market sell-off paused last week, the CNN Fear and Greed Index (https://www.cnn.com/markets/fear-and-greed) remains in Extreme Fear. Many people are pointing to the Extreme Fear level as a sign that it’s time to buy the dip. But investors need to keep in mind that the CNN Fear and Greed Index can remain in the Fear and Extreme Fear levels for years before the stock market finally bottoms out. With market sentiment still bearish, this would not be a good time to buy stocks. The best time to buy stocks is when market sentiment rises out of fear and at least approaches neutral, and preferably greed. When that first starts to happen, it’s confirmation that the new market rally will continue. But so long as market sentiment remains fearful, the risk of a continued sell-off in stocks remains.

And while last week the VIX gave me hope that things could turn around, this week it’s looking a little worse. The VIX closed Friday at 19.83. And while that is still technically Neutral (the only factor in the CNN Fear and Greed Index that is not in Fear or Extreme Fear), it’s borderline bearish, as any number over 20 is bearish. This lines up with the overall stock market movement, showing a pause in the sell-off last week, but other indicators continuing to become more bearish, indicating last week’s pause in the selling will be short lived and will resume this week.

Technical Analysis

Technical analysis on the daily charts is 60% bearish on the DOW, S&P 500, and NASDAQ, and 100% bearish on the Russell 2000. Specifically on the DOW, S&P 500, and NASDAQ, the candles have not yet closed below the 21 day EMA, and the 10 day and 21 day EMA lines have not yet formed death crosses. But the other technical factors, including the TTM Squeeze, MACD, and RSI are all bearish. So overall, the daily charts do indicate the markets will continue to sell-off, but there is some hope for a rebound, since the EMA lines are still borderline bullish. Unfortunately with the Russell 2000 fully bearish, it’s unlikely the overall stock market will recover. If the top 3 major indices have any hope of rebounding, only the top 10 largest companies are likely to recover this week. Most stocks will probably fall.

The bulls will be happy to hear that the weekly charts are still 100% bullish, at least on the DOW, S&P 500, and NASDAQ. But some indicators are borderline bullish, and will most likely turn bearish this week, giving us the first signs of bearishness since May. Specifically, the MACD is about to turn bearish. Once it does, the markets will only be 20% bearish, but that will still be the first sign of bearishness since May.

But with everything else still bullish, the market doesn’t look poised for a major sell off yet. The weekly charts are indicating some flattening out over the next few weeks, rather than a major sell-off. So I don’t think we’ll enter correction territory yet. The most likely scenario is more flat trading this week. Just keep in mind that while the chart might finish the week fairly flat, daily movements could still be up or down 2% on any given day.

Economic News

The government has reopened, and economic news will start flowing in again this week. Some economic news may never be released, such as the October jobs data, while other economic news will be released throughout this week. It’s still uncertain when each delayed report will be released, so day traders need to exercise extreme caution this week. Delayed inflation data and jobs reports could cause massive movements in the stock market this week. Make sure you check the economic calendar below, which has up-to-date information on when each delayed report will be released.

Also be wary of more Fed speakers speaking on Monday. When Fed members spoke last week, they destroyed the market’s hopes for more rate cuts in December, which caused major selling on Thursday.

Here’s the full list of all of the economic news coming out this week as well as the time each report is being released: https://www.marketwatch.com/economy-politics/calendar

Here’s what time each Fed member is speaking this week: https://www.federalreserve.gov/newsevents/calendar.htm

Earnings

There’s only one earnings that matters this week, and it’s Nvidia. Nvidia reports earnings Wednesday after the bell, and could cause an outsized impact on the stock market on Thursday. Nvidia makes up 14% of the Nasdaq, 7.6% of the S&P 500, and 2.5% of the DOW. It could cause a 2% rise or fall in the NASDAQ and a 1% rise or fall in the S&P 500 by itself, even if all other stocks trade flat. So even if you’re not invested in Nvidia, you need to pay attention to Nvidia’s earnings, as they’ll move the market on Thursday.

And don’t forget about some consumer spending companies that could move the market as well, especially the DOW. Those include Home Depot, Target, and Walmart, all reporting earnings this week.

Crypto

Crypto continues to crash, just like I’ve been warning about for the past 2 weeks. Bitcoin is now in bear market territory, down 26% from all time highs. I do believe the sell-off will continue for the next few months, with Bitcoin bottoming out at around $55,000. Expect major selling in crypto stocks, especially stocks that hold Bitcoin, as the value of Bitcoin falls below those company’s average purchase prices. Stocks like MSTR could be hit especially hard.

The way I would play this is to short crypto (and crypto stocks) through May of 2026. Then sit on my hands for 6 months. And then start buying crypto and crypto stocks again in November of 2026. That would be the best play if this upcoming crypto winter plays out the same as the prior two crypto winters.

Other Things to Know

Multiple trading platforms continue to offer free stocks and high yields on cash. So get your free stocks while you still can at https://weprofit.io/platforms/.

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Wishing you the best of success trading this week,
Stock Curry