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S&P 500, Nasdaq 100: Bulls Push into CPI After Last Week’s Bullish Engulf

S&P 500, Nasdaq 100: Bulls Push into CPI After Last Week’s Bullish Engulf

James Stanley, Senior Strategist

Indices Talking Points:

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Stocks are starting the week with a glimmer of hope following last week’s build of a bullish engulfing formation on the weekly charts of both the S&P 500 and the Nasdaq 100. Those formations printed after a shorter-term formation had led into reversals early last week, as each index had also formed a falling wedge formation at key points of support, which started to give way last Wednesday which was followed by a very strong Thursday and Friday, with price action jumping higher into the end of the week.

For this week, bulls have an open door after the confirmation of last week’s bullish engulf. From the weekly chart below, we can also see a symmetrical triangle that’s been building through 2022 trade, with last week’s bounce a hit from support in that pattern.

With CPI set to come out tomorrow and the Fed currently in a blackout window, there could be drive for trends within the confines of this longer-term consolidation.

S&P 500 Weekly Price Chart

spx weekly chart

Chart prepared by James Stanley; S&P 500 on Tradingview

S&P 500 Shorter-Term

From the daily chart we can see how quickly that bullish move came together last week, which gives the appearance of having a heavy drive of short-cover.

Current resistance is showing at prior price action support, around 4113, and there’s a bit of unfilled gap that runs from around 4010 up to the open of last Friday’s bar, just above 4020.

The big spot of resistance for this week appears around a confluent spot around 4220. This is nearby the 50% marker of the 2022 selloff and the 14.4% marker of the June bounce. Perhaps more importantly, this was an area of actual price action back in February when markets really started to pullback on the premise of both a hawkish Fed and war tensions in Eastern Europe.

Between current price and that level is another area of resistance potential plotted at 4165.

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S&P 500 Daily Chart

spx500 daily chart

Chart prepared by James Stanley; S&P 500 on Tradingview

S&P 500 Shorter-Term

Going down even tighter on the chart and we can focus-in on this recent move. There’s been very minimum of pullback here and given how aggressive bears were hitting price on the way down, that’s peculiar and often indicative of a short-squeeze type of move.

But – many bullish trends start as a short-covering rally and with a couple of drivers on the horizon, it’s worth keeping an open mind here. Or, perhaps more importantly, it’s worth waiting for evidence of bears making a re-entrance before plotting as such.

There’s a short-term support level around 4085 which is a Fibonacci level that helped to cap last week’s high. A bit-lower is another Fibonacci level around 4065 and that’s followed by the gap from Friday which runs from approximately 4010-4020.

For the big picture bearish trend – sellers are going to need to finally take-out and leave-behind that massive spot of support around the 3900 area, from which sellers were stymied last week.

S&P 500 Four-Hour Chart

spx four hour chart

Chart prepared by James Stanley; S&P 500 on Tradingview

Nasdaq 100

To my eyes, the Nasdaq 100 looks more trepidatious in this bullish theme that what’s shown above in the S&P 500.

While the S&P 500 held support at the bullish trendline, thereby keeping the symmetrical triangle in order, the Nasdaq 100 broke below that boundary and even caught a bit of resistance there around the close of the prior week. And similarly, buyers pushed higher through last week but the moves appeared to be more moderate here than what I have seen in the S&P 500.

There is some similar resistance sitting overhead, however, as that prior spot of price action support around 12,814 retains support-turned-resistance potential. Another such level sits a little higher, around 12,942. And above that is the 38.2% retracement of the 2022 sell-off which is followed by the projection of the bearish trendline taken from January highs. That currently projects to around 13,402.

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Nasdaq 100 Daily Price Chart

Nasdaq daily chart

Chart prepared by James Stanley; Nasdaq 100 on Tradingview

Nasdaq Shorter-Term

On the support side of the equation, there’s a spot of resistance-turned-support around 12,658, after which a Fibonacci level comes into play at 12,585. Below that we have the trendline projection taken from June and July swing lows after which the 12,414 Fibonacci level comes into the picture. That latter level had functioned as support in late-August and resistance in early-September, so I’d likely give that level a bit more weight than the trendline projection at this point – but both are key for bears to take-out for bearish continuation themes to come back into the picture.

Nasdaq Two-Hour Price Chart

nasdaq two hour chart

Chart prepared by James Stanley; Nasdaq 100 on Tradingview

--- Written by James Stanley, Senior Strategist, DailyFX.com & Head of DailyFX Education

Contact and follow James on Twitter: @JStanleyFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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