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S&P 500: Short-term Chart Weakening, Nasdaq 100 Could Be the Better Short

S&P 500: Short-term Chart Weakening, Nasdaq 100 Could Be the Better Short

Paul Robinson,

What’s inside:

  • Short-term technical structure weakening
  • Rising wedge breaking, looking for an undercut of prior higher low for confirmation
  • The Nasdaq 100 may be the better way to go from the short-side

Yesterday, we went over some ‘macro-tech’ developments, discussing signs of fracturing market health in the face of the current rally as the S&P 500 reaches towards record highs. You can read the commentary here for further details. It's broader-based analysis, but could soon apply given short-term developments beginning to unfold.

Looking at the short-term: The recent grind higher continued through yesterday, with higher lows and higher highs carving themselves out on the intra-day time-frame. However, one of those higher lows could soon come under fire just beneath the 2108 level with the rising wedge in place since the 5/29 peak triggering to the down-side.

For shorts to become more attractive we would like to see a break of the most recent higher low as well as the 2105 level which kept a lid on the market twice in the past couple of weeks. This would clear a path for a potential move back towards the important 2085 level which previously held so well as support.

Conversely, if support levels hold then so does our 'excitement' over establishing short positions. More of the same upward grind could continue in that case...

SPX500 Hourly

If a break lower begins to take shape the better index to short at this time may be the Nasdaq 100. The following chart posted on Twitter yesterday clearly shows the market divergence along with trend-line resistance. Trading relative strength is an age-old strategy for trading related markets; buy the stronger index and short the weaker one.

NDX 100 w/SPX

Whether you are a newbie or experienced trader, there is always room for improvement. Check out our guide, "Traits of Successful Traders" to see where you may be able to improve.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX.

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