US Indices Technical Outlook:
- S&P 500 declined into important slope support
- Dow also traded down to the Jan 2018 trend-line
- Nasdaq 100 pulling back to a lesser degree of support
See where our analysts see the stock market heading in the Q4 Equity Market Forecast.
S&P 500 declined into important slope support
The S&P 500 came off hard on Monday and then gapped lower yesterday after having put together an extremely persistent for the two-months prior. But how will the market respond from here? Yesterday’s gap down and reversal suggests there may be some short-term upside.
The reversal itself was of interest, but the fact that it came at an important long-term threshold is what gives it some real weight. The January 2018 trend-line crossing over highs in September 2018 and July of this year is viewed as a fairly significant line given its connecting points and influence over the summer.
If the market can hold onto yesterday’s low at 3070, or even if it trades a little beneath but still holds onto the slope from early 2018, then weakness may turn out to be one of the year’s last dips before completing a strong performing year.
If, however, a response from around current levels is lacking in power, then a weak attempt to quickly reverse losses could be indicating a decline of meaning has begun. A decline below the 2018 slope would quickly have 3025, the summer high, in focus, as well as the trend-line from December of last year and May of this year.
S&P 500 Daily Chart (Jan 2018 slope in play)
Dow also traded down to the Jan 2018 trend-line
The Dow Jones Industrial Average slipped just below the similar 2018 threshold as seen in the S&P 500. It did manage yesterday well to close off the lows, but the two losses were still rather significant given recent price action. How the market responds from here will be telling; pop back with force or put together a weak series of sessions where the market either moves sideways or worse. A failure to mount a quick recovery could set up the Dow for more losses should it continue to then drop below the January 2018 slope.
Dow Jones Daily Chart (2018 slope support)
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Nasdaq 100 holding up on a top-side trend-line
The Nasdaq 100 declined below the April slope making up the top crust of an ascending wedge, but did find support via the trend-line running over from September of last year, a line that also makes up the top part of an even larger wedge.
A decline below the Tuesday low at 8167 could have in play the trend-lines from December of last year and June of this year. A hold of support after gapping lower and thrusting higher, could lead to a new high or congestion phase if a run to end the year is in the cards. In wait-and-see mode at the moment.
Nasdaq 100 Daily Chart (Sep ’18 slope)
To learn more about U.S. indices, check out “The Difference between Dow, Nasdaq, and S&P 500: Major Facts & Opportunities.” You can join me every Wednesday at 1030 GMT for live analysis on equity indices and commodities, and for the remaining roster of live events, check out the webinar calendar.
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX