Small-Caps Drop 2%, Monday’s Open Shaky
The stock market was slightly lower last week with the exception of the small-caps which took a much bigger hit after reaching overbought conditions for the second-straight week. Volatility spiked near the back half of the week but held major resistance levels.
The Nasdaq closed at 23,461 (-0.9%) after testing a low of 23,351. Key support at 23,500 failed to hold. Resistance is at 23,750.
The S&P 500 bottomed at 6,893 while ending at 6,939 (-0.4%). Crucial support at 6,925 was tripped but held. Resistance is at 6,975.
The Dow finished at 48,892 (-0.4%) with the low at 48,459. Support at 49,000 failed to hold. Resistance is at 49,250.
Earnings and Economic News
Before the open: Tyson Foods (TSN), Walt Disney (DIS)
After the close: Palantir Technologies (PLTR), Teradyne (TER)
Economic News
PMI Manufacturing Index – 9:45am
ISM Manufacturing Index – 10:00am
Technical Outlook and Market Thoughts
For the week, the Nasdaq dipped 0.2% and the S&P 500 slipped 0.3%. The Dow was off 0.4% while the Russell tumbled 2%. Year-to-date, the Nasdaq has gained 0.9% and the S&P has advanced 1.4%. The Dow is up 1.7% and the Russell is still up a cool 5% for 2026.
The Nasdaq just missed a fresh record high midweek by 31 points after peaking at 23,988 and below the October 29th top at 24,019. We have talked about a possible run to 25,000 if both levels clear, but the index only had the one day Wednesday close above 23,750. We always say wait for multiple closes above resistance or below support to confirm possible new price direction. The most important development from Friday’s action is the possible formation of a near-term double-top. It will be imperative the bulls clear and hold at least 24,000-24,250 next week.
Crucial support at 23,250 was cracked but held on Thursday’s opening plummet to 23,232. Closes below 23,000 and the 50-day moving average would likely confirm a near-term peak and something we have been highlighteding in our notes from January 2nd.
The Russell 2000 has fallen in four of the past six sessions with Friday’s low at 2,599. Key support from early January at 2,600 was breached but held. There is wiggle room down to 2,575 with a close below this level indicating a near-term top with additional weakness to 2,550-2,525.
Resistance is at 2,650-2,675. Our October 8th Price Targets were at 2,600-2,650 and we predicted possible “stretch” up to 2,700 for the index on January 9th. We also said there could ongoing strength up to 2,725-2,750 if cleared. The previous Thursday’s all-time high nearly split those price targets after topping out at 2,735. The RSI (relative strength index) closed at 49.90 on Friday to give a neutral reading heading into the week.
The S&P 500 held major support at 6,925 in back-to-back sessions. Backup help is at 6,850 and the 50-day moving average with Thursday’s low at 6,870. Closes below these levels would also imply a possible top.
We have been talking about a final push to psychological resistance at 7,000 and that was cleared, but not held, on Wednesday’s record run to 7,002. Closes above this level could lead to a breakout up to 7,150.
The Dow has basically been in a 1,000 point range since January 5th, or 19 sessions. Key support at 48,500 was cracked on Friday’s fade to 48,459 and the January 20th tumble to 48,428. Closes below 48,500 and the 50-day moving average would be bearish development with additional risk down to 48,000-47,750.
Resistance remains solid, and specifically, at 49,600 on a recovery of the 49,000 level. The January 12th record high is at 49,633 and our Price Target from February 23rd, 2024 is at 50,000 for the blue-chips.
The S&P 500 Volatility Index (VIX) is now forming a fresh symmetrical off of the November 20th peak at 28.27 and the December 24th low at 13.38. The helps confirm our overall market warning on closes above 20 on the VIX. If held on MULTIPLE closes, the bears will likely push 24-30.
Support is at 16.50-16. Closes below 15 are likely needed to keep all-time highs in play for the major indexes.
The 4Q earnings started to peak last week following the bevy of high-profile Tech companies that reported. There are still some heavy hitters coming up to bat this week, especially on Wednesday and Thursday, with Google and Amazon after the close on both days.
In review, key support levels to watch for the major indexes: Nasdaq 23,250-23,000; S&P 6,850-6,800; Dow 48,500-48,000; and Russell 2,600-2,575. If lower levels of support start to crack across the board, February (and March) could look a little like last year’s price action and an outcome we have been penciling in for months.
The February monthly options have 18 days before expiration on Monday’s open and the March monthly options will have 46 days. We like to give directional alerts 4-7 weeks to play out so we are now targeting the March monthly options and possibly April calls and puts for our directional alerts. April options have 74 days before expiration.
Futures are pointing towards a nasty open for Monday. Dow futures are down 477 points; Nasdaq futures are stumbling 479 points; S&P futures are sinking 95 points; and Russell futures are getting hit for 45 points.
Momentum Options Alerts Update
Closed Momentum Options Trades for 2026: 4-0 (100%, 2 triple-digit winners); 2025: 55-20 (73%, 17 triple-digit winners); 2024: 77-17 (82%, 38 triple-digit winners); 2023: 34-11 (76%, 8 triple-digit winners). Please remember, all “Exit Targets” and “Stop Targets” are targets. You should not have any “Stops” entered to close any alerts or “Limit Orders” in your brokerage account unless we list one. We will send out an “Alert” or “New Alert” if we want you to close a position or if a new position comes out. Otherwise, follow instructions at all times in the updates on Monday’s and Thursday’s along with Text Alerts and videos throughout the week.
Viavi Solutions (VIAV, $24.46, down $0.24)
Option: VIAV February 24 calls
Expiration Date: February 20th, 2026
Entry Option Price: $0.35 (1/27/2026)
Current Option Price: $1.40 (closed half on 1/28 at $0.70)
Exit Target: $2.10, raise to $3
Return: 200%
Stop Target: 70 cents, raise to $1 (Stop Limit)
Action: Raise the Stop Limit at 70 cents to $1.
We said there was breakout potential to $25 with the Thursday and Friday highs at $24.95 and $24.99, respectively. Our target zone for the option was for a zoom past $2. Bingo. Let’s now shoot for $3.
Closes above $25 could lead to a fresh breakout towards $27.50-$30 for the stock. Shaky support is at $23-$22.75.
KeyCorp (KEY, $21.52, down $0.11)
Option: KEY March 23 calls
Expiration Date: March 20th, 2026
Entry Option Price: $0.35 (1/22/2026)
Current Option Price: $0.20
Exit Target: $0.70
Return: -43%
Stop Target: None
Action: Friday’s peak reached $21.78 with key resistance at $22 holding. Closes above this would be bullish for a breakout towards $22.50-$24. Support is at $21-$20.75.
There is risk to $20 and the 50-day moving average if $20.75 fails. We have a mid-March price target of $24 for the stock. If reached, the calls will be at least $1.00 in-the-money.
Match Group (MTCH, $31.15, up $0.13)
Option: MTCH February 27.50 puts
Expiration Date: February 20th, 2026
Entry Option Price: $0.40 (1/13/2026)
Current Option Price: $0.40
Exit Target: $0.80
Return: 0%
Stop Target: None
Action: Shares tagged a low of $30.42 on Friday with upper support at $30.50-$30.25 getting tripped but holding. Resistance is at $31.50-$31.75.
We have a Price Target zone of $27.50-$25 on a technical setup AND a possible earnings miss when the company reports in early February. A fresh symmetrical triangle remains in play with a move below $30 likely speeding up selling pressure.