S&P 500, SPX, NASDAQ 100, NDX, DJIA – OUTLOOK:
- The S&P 500 and DJIA have fallen below key support.
- The Nasdaq 100 index risks a bearish head & shoulders pattern.
- What are the outlook and the key levels to watch in the three US indices?
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The rally in US indices appears to be cracking – the S&P 500 and the Dow Jones Industrial Average (DJIA) have broken below key support, while the Nasdaq 100 index looks vulnerable amid a potential bearish formation. For more discussion on the fundamental drivers, see “US Indices Risk Support Test After Hawkish Fed: S&P 500, Nasdaq Price Action,” published September 21.
S&P 500: Falls below key support
The S&P 500 has fallen below a vital converged support, including the June low of 4325, the 89-day moving average and the lower edge of the Ichimoku cloud on the daily charts –a risk highlighted in the last week’s update. The break is critical as the higher-top-higher-bottom sequence since the beginning of the year has been broken. The break has opened the way toward the 200-day moving average initially, now at about 4195. Below that, the next support is at the end-April low of 4050.
S&P 500 Daily Chart
The evolving price action further reinforces the broader fatigue on higher timeframe charts, as pointed out in previous updates. See “US Indices Hit a Roadblock After Solid Services Print: S&P 500, Nasdaq,” published September 7; “US Indices Rally Beginning to Crack? S&P 500, Nasdaq Price Setups,” published August 3; “S&P 500, Nasdaq 100 Forecast: Overly Optimistic Sentiment Poses a Minor Setback Risk,” published July 23.
Nasdaq 100: Head & Shoulders Risk
The Nasdaq 100 index is testing a crucial horizontal trendline from June (at about 14550-14560). Any break below would trigger a head & shoulders pattern – the left shoulder is at the June high, the head is at the July high, and the right shoulder is at the early-September high. If triggered, the price objective of the bearish pattern would be around 13200, near the 200-day moving average.
Nasdaq 100 Daily Chart
Moreover, from a big-picture perspective, as highlighted in arecent update, the momentum on the monthly charts has been feeble compared with the huge rally since late 2022, raising the risk of a gradual weakening, similar to the gradual drift lower in gold since May. For more discussion, see “Is Nasdaq Following Gold’s Footsteps? NDX, XAU/USD Price Setups,” published August 14.
Dow Jones Industrial Average Weekly Chart
Dow Jones Industrial Average: Cracks below support
After a bullish break in July, the Dow Jones Industrial Average failed to sustain gains. This week the index has fallen below the resistance-turned-support on a horizontal trendline from July (at about 34300). The break has opened the way initially toward the May low of 32600, possibly the 200-week moving average (now at 31720), coinciding with the March low.
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