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S&P 500, Dow Jones, Nasdaq Technical Forecast: Mixed Picture in U.S. Stocks

S&P 500, Dow Jones, Nasdaq Technical Forecast: Mixed Picture in U.S. Stocks

Diego Colman, Market Analyst

S&P 500 WEEKLY FORECAST: SLIGHTLY BEARISH

S&P 500 TECHNICAL OUTLOOK

After hitting an all-time high last month, the S&P 500 has been setting lower highs and lower lows sequentially amid fading buying interest, just as the Fed prepares to taper its asset purchases program. The price action pattern shown in the daily chart is somewhat bearish for the near term, but the situation could be reversed if the index manages to climb above both the October swing high and its 50-day SMA, before overtaking key resistance in the 4,465 area. If this scenario materializes, the S&P 500 would be on track to print its first higher high in a while, an outcome that could pave the way for a move towards its all-time high at 4,546. On the other hand, if selling pressure picks up, which seems likely due to the weakening market breadth, the first support to watch for is at 4,370 points. A drop below this floor could trigger a pullback towards the monthly low of 4,279 (October low).

S&P 500 TECHNICAL CHART

S&P 500, Dow Jones, Nasdaq Technical Forecast: Mixed Picture in U.S. Stocks

Source: TradingView

DOW JONES FORECAST: SLIGHTLY BULLISH

DOW JONES TECHNICAL OUTLOOK

The Dow Jones’ daily chart appears to show the development of a double bottom pattern since September. This technical formation, which resembles the letter "W", has bullish implications for the underlying asset once validated. Confirmation occurs when price completes its W shape and pierces the figure neckline given by the intermediate peak. In our case, this resistance is found in the 35,060 area. If bulls were successful in driving price above this barrier in the coming week, we could be in the early stages of the next leg higher, capable of taking the blue-chip index towards 36,500 (see chart for other levels of resistance). If the Dow fails to gain momentum and starts to move lower with more conviction, support in seen in the 33,800/33,700 area. If price fell below this floor, the bullish pattern mentioned before would be invalidated, opening the way for a steeper decline towards the June low at 33,272.

DOW JONES TECHNICAL CHART

S&P 500, Dow Jones, Nasdaq Technical Forecast: Mixed Picture in U.S. Stocks

Source: TradingView

NASDAQ 100: SLIGHTLY BEARISH

NASDAQ 100 TECHNICAL OUTLOOK: SLIGHTLY BEARISH

The Nasdaq 100 is in a similar position to the S&P 500. The presence of lower highs is a short-term bearish signal pointing to deteriorating market sentiment. At the same time, the relentless rise in U.S. Treasury yields also poses a near-term risk to tech stocks valuations and can be seen as a negative catalyst for price action. That said, if the index moves lower, attention will immediately turn to horizontal support in the 14,775 area. A move below this floor could rejuvenate downward pressure and trigger a decline towards the October low at 14,385. On the flip side, if buyers regain control of the market, the first resistance to watch out for sits near 15,000, in the vicinity of a short-term descending trendline in play since last month. Next, we have 15,002 (the 61.8% Fib retracement of the Sept/Oct sell-off), followed by 15,350.

NASDAQ 100 TECHNICAL CHART

S&P 500, Dow Jones, Nasdaq Technical Forecast: Mixed Picture in U.S. Stocks

Source: TradingView

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---Written by Diego Colman, Contributor

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

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