Dow, S&P 500, Nasdaq 100 Talking Points:
- U.S. markets were closed for President’s Day yesterday but sellers remained at work a s looked at last Thursday, particularly in equity futures as the Nasdaq 100 set a fresh eight-month-low.
- I remain bearish on U.S. stocks, largely on the basis of the sentiment shift that’s shown so far this year. The Nasdaq remains most attractive from a bearish perspective, while the S&P 500 is closing in on its eight-month-low and the Dow Jones Industrial Average is at a key zone of longer-term range support. The bear bounce that started in late-January is now almost entirely priced-out.
- The analysis contained in article relies on price action and chart formations. To learn more about price action or chart patterns, check out our DailyFX Education section.
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The Nasdaq 100 set a fresh eight-month-low yesterday, even as US equity markets were closed in observance of President’s day. As many had predicted, the day after the Winter Olympics finished in Beijing was also the first that Russia sent tanks into Ukraine, albeit under the cover of a ‘peace keeping mission.’
In the Nasdaq 100 – that low came from a gap-down at last night’s open in the futures market, which saw prices push below a key Fibonacci level at 13,712 before bulls made a re-appearance around the European open. That led to a sharp move with prices pushing back up to the 14,059 level, which has remained in play since late-January, with another level of support along the way at 13,900.
That 14,059 level was support just last Thursday, as the Nasdaq 100 was brewing in a bear pennant formation along with a symmetrical triangle. The triangle was taken-out yesterday, pointing to the possibility of further bearish price action.
Nasdaq 100 Four-Hour Price Chart
Chart prepared by James Stanley; Nasdaq 100 on Tradingview
Nasdaq 100 Levels
The 13,700 spot is big as there’s a Fibonacci level nearby that helped to catch the January swing-low. This level has already been violated, so if bulls do pull up shy of re-testing the low, there could be a bearish bounce in store. Below that, the 13,600 level that held the overnight low remains relevant, after which 13,287 holds some allure for deeper support.
Longer-term, it’s the zone from 12,894-12,991 that looms large.
Nasdaq 100 Daily Price Chart
Chart prepared by James Stanley; Nasdaq 100 on Tradingview
S&P Holding Up a Bit Better
If traders are looking for a short-term bounce, the S&P 500 may be a bit more attractive than the Nasdaq looked at above.
While the Nasdaq slid down to that fresh low the S&P 500 has yet to follow suit. The 4260 level came into play overnight to help hold the low here and there’s another major inflection point a little lower, around 4224 which is confluent with the January low. That’s also confluent with the 38.2% retracement of the post-election run, and a breach of that confluent batch of support opens the door for a run down towards the 4k psychological level.
S&P 500 Daily Price Chart
Chart prepared by James Stanley; S&P 500 on Tradingview
S&P 500 Shorter-Term
The S&P 500 continues to ride along levels produced by the Fibonacci retracement from the January move in the index. The 61.8% marker has caught resistance twice now, and after the 23.6% marker helped to set support last week, it’s back in as resistance today.
For next supports, I’m looking at 4298, 4260 and then 4213-4224. On resistance, 4353 remains big but a re-test there I’m likely going to be looking for a topside breach, which would then put the focus on 4381 and 4400. The notable zone for this week is just a bit higher, around the 4400 level which is also the 38.2% retracement of that January sell-off.
If buyers can force a test through that zone, I’ll look for next resistance(s) at 4472 and then 4498-4510.
S&P 500 Four-Hour Price Chart
Chart prepared by James Stanley; S&P 500 on Tradingview
Dow: Triangle Break
I had looked at a symmetrical triangle in the Dow Jones Industrial Average last Thursday. After forcing a break later in the session, prices checked back for resistance at prior support before continuing to head lower. This keeps the focus on bearish themes with prices now re-testing a key zone inside of the 33,623 level that’s previously marked range support since last-July.
Dow Jones Daily Price Chart
Chart prepared by James Stanley; Dow Jones on Tradingview
After testing below that range support last night, similar to the Nasdaq 100 at its eight month low, prices jumped. But that bullish pullback was limited in scope, and sellers showed back up at the 23.6% Fibonacci retracement of the January sell-off.
This puts intense focus on the 33k level that’s currently holding as the seven-month-low in the Dow. While bearish themes can remain attractive here, the Nasdaq 100 and S&P 500 both hold a bit more allure, at least in my opinion, on the short side of equities.
Dow Jones Four Hour Price Chart
Chart prepared by James Stanley; Dow Jones on Tradingview
--- Written by James Stanley, Senior Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX
