Nasdaq 100 & Dow Jones Price Outlook:
- The Nasdaq 100 pressed to new heights yet again this week as it followed Asian equities higher
- The Dow Jones remains a laggard, but enjoys nearby technical support nonetheless
- Will a broader rally in equity markets help extend gains enjoyed by the Nasdaq 100 and Dow Jones?
Nasdaq 100 & Dow Jones Forecast: Are Stocks in for Another Leg Higher?
In an unusual turn of events, Asian equities appeared to be the driving force behind early stock gains this week as the Hang Seng index broke above a key technical barrier. Bullishness from the session transitioned into early strength for US indices which was then exacerbated by uplifting ISM services data, which culminated in a stellar performance for the Nasdaq 100. The events allowed for the tech-heavy index to forge yet another record high, but unlike recent weeks, it would seem demand for the market’s largest and most popular tech stocks was not the initial catalyst – a key shift in investor attitude.
To that end, continued demand in other markets and regions could help prolong the US stock rally just as signs of weakness were beginning to show. Since I have long been critical of current equity valuations in the United States, it will be interesting to see if other indices begin to outpace the Nasdaq 100, Dow Jones and S&P 500 or if bullishness in other areas will fuel further exuberance in the three major US indices. Either way, widespread demand for equity exposure is an encouraging development, particularly when combined with some of the positive data readings emerging from various countries.
Nasdaq 100 Technical Outlook
In the case of the Nasdaq 100, little has changed from a technical perspective as the index remains locked within the ascending channel from mid-April. Interestingly, price action stalled near the 10,600 level on Monday, suggesting the Fibonacci level possesses at least a modicum of influence. Should bulls achieve a successful drive above the barrier, further bullishness could see the upper bound of the ascending channel tested.
Nasdaq 100 Price Chart: 4 – Hour Time Frame (February – July)
On the other hand, range traders will be sure to note the index’s position near the upper level and IG Client Sentiment Data on each of the Dow Jones and S&P 500 would suggest retail traders are confident a breakdown will occur to keep the range intact – a sign we typically associate with further bullishness. Therefore, there is little to suggest an imminent reversal.
| Change in | Longs | Shorts | OI |
| Daily | -15% | 8% | -1% |
| Weekly | -7% | 3% | 0% |
Dow Jones Technical Outlook
Shifting over to the Dow Jones Industrial Average, it can be argued the index has encountered resistance around the 26,350 mark. Crucially, recent price action has allowed the Dow to avoid a series of cascading lower-highs, a theme I outlined last week as a key technical threat to the Industrial Average.
Dow Jones Price Chart: 4 – Hour Time Frame (February – July)
To be sure, a continuation above 26,350 would be an encouraging development that may allow the DJIA to eventually re-test the Fibonacci level at 26,883. In the meantime, follow @PeterHanksFX on Twitter for updates.
--Written by Peter Hanks, Analyst for DailyFX.com
Contact and follow Peter on Twitter @PeterHanksFX
