(MENAFN-DailyFX) Indices Technical View: Neutral
- S&P 500, Nasdaq & Dow Technical Trading Levels Update – Weekly Charts
- SPX500 support 3734, 3665, 3501 resistance 3906, 4089-4179, 4368/76
- Nasdaq Support 11119, 10589, 9206/446 – Resistance 12208, 12668, 13225
- Dow support at 29794, 28323, 27583/919 – resistance 31392, 32272/375, 33271
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A volatile stock month keeps all three major stock indices within a well-defined monthly range through next week. While the broader technical outlook remains skewed to the downside, the threat of a major rebound within the broader downtrend is increasing towards the end of the month and the battle lines are being drawn. SPX500), Nasdaq (NDX) and the Dow Jones Industrial Average (US30) weekly technical price charts. Watch my latest strategy webinar for a detailed breakdown of these technical stock setups and more.
S&P 500 Price Chart – SPX500 Weekly
Diagram created by Michael Boutros, Technical Strategist; SPX500 on commercial view
Technical Outlook: In last month’s S&P500 Weekly Technical Outlook, we noted, “A three-week decline brings the S&P 500 into support here at the 2021 lows – we’re looking for a possible near-term reversal here next week. Rallies should be capped by 3906 if price bears down this stretch, with a close below 3665 still needed to mark the resumption of the broader downtrend towards 3500.” The index held this low with prices between 3665 and 3906 in the last four weeks. Focus is on a breakout of the July opening range for guidance, with the broader annual decline vulnerable in the medium term while above target to open 2021 at 3734.
A break to the upside would threaten a major rebound within the broader annual downtrend, with such a scenario closing the upper resistance at the 38.2% yoy range retracement (4089) and the May high/low weekend turn at 4179 – both interesting Levels of possible exhaustion IF reached.
The broader bearish invalidation is now down to the 61.8% retracement/52 week moving average at 4368/76. Initial weekly support stands at 3734, with a break/close below 3665 needed to keep focus on key support zone at 3419-3501.
Conclusion: The immediate focus is on a breakout of the monthly range with the risk of a major bear market rally in the medium term. Check out my latest S&P 500 Short Term Technical Outlook for a closer look at the SPX500 short term technical trading levels.
S&P 500 Trader Sentiment – SPX500 price chart
- A summary of IG customer sentiment shows that traders are net long the S&P 500 – the ratio is +1.34 (57.30% of traders are long) – typically a mild bear market
- Long positions are 7.49% lower than yesterday and 0.22% higher than last week
- Short positions are up 5.79% from yesterday and 0.73% from last week
- We typically view crowd sentiment as contrarian and the fact that traders are net long suggests that SPX500 prices could fall further. Still, traders are less net long than yesterday and compared to last week. From a sentiment standpoint, recent positioning changes warn that the current S&P 500 price trend could soon reverse higher, although traders remain net-long.
Nasdaq 100 price chart – NDX Weekly
Diagram created by Michael Boutros, Technical Strategist; NDX on trading view
Notes: Nasdaq recovered from confluent support at lower parallels / September 2002 week low at 11119 by the end of June. Since then, the index has held a well-defined monthly opening range just below the 2021 swing low at 12208 – we are looking for a break of this range for guidance. Ultimately, a break/close to the upside above the 2021 weekly low at 12668 would be required to indicate that a major recovery is underway here towards the 38.2% retracement of the yearly range at 13225. A break/close on the downside keeps focus on key support at the 61.8% Fibonacci retracement of the 2020 Rally at 10589 – look for a major price reaction there IF it is reached.
Conclusion: A bounce off downtrend support still resists a test of downtrend resistance at the upper parallel. From a trading perspective, the focus is on a breakout of the 11119-12208 range for guidance, with the bearish invalidation lowered to 12668.
Dow Jones Industrial Average Price Chart – US30 weekly
Diagram created by Michael Boutros, Technical Strategist; US30 on commercial view
Note: The Dow has traded within the confines of this descending pitchfork formation extending from the 2021 high for the past three weeks, with pullbacks defending the midline. Initial weekly resistance holds steady at 31392, supported by 32272/375 – a region defined by the upper parallel/February low and the 100% extension of the June rally. A break/close above this level would be needed to suggest that a major recovery is underway (also an area of interest for possible exhaustion on the upside if reached). Initial support stands at 29794 with a break to the downside threatening the resumption of the broader downtrend towards the gap at 28323 revealed in November 2020 and the Fibonacci confluence at 27583/919.
Conclusion: The Dow has recovered from downtrend support and still threatens to test downtrend resistance before resuming. From a trading perspective, rallies from 32375 should be capped if the price is indeed trending down, with a break likely to fuel another accelerated decline towards 28000.
For a full breakdown of Michael’s trading strategy, see his Fundamentals of Technical Analysis series on building a trading strategy
Active weekly technical setups
- Silver (XAG/USD)
- US Dollar Index (DXY)
- Gold (XAU/USD)
- Canadian Dollar (USD/CAD)
- Crude Oil (WTI)
- British pound (GBP/USD)
- Euros (EUR/USD)
- Australian Dollar (AUD/USD)
-Written by Michael Boutros, Technical Strategist at DailyFX
Follow Michaelon on Twitter @MBForex
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