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S&P 500, Nasdaq 100 Chart Analysis – Price Sequences Favor More Selling

S&P 500, Nasdaq 100 Chart Analysis – Price Sequences Favor More Selling

Paul Robinson,
What's on this page

S&P 500/Nasdaq 100 Highlights:

  • Short-term head-and-shoulders to lead to more weakness
  • Break of 2790 will bring May trend-line into play
  • Nasdaq 100 tip-toeing on April trend-line

For longer-term trading ideas, Q3 forecasts, and a library of educational content, check out the DailyFX Trading Guides

More weakness ahead for S&P 500, Nasdaq 100

Last week, when we were discussing the S&P 500 we expressed interest in seeing whether or not volatility will begin to pick with the market trading near record highs and seasonality on the verge of turning decisively negative for the next couple of months.

Volatility is indeed beginning to pick up with recent weakness, and if the short-term head-and-shoulders (on the hourly time-frame) results in a break of 2790, then look for this theme to continue maturing. The cash index, since around 7/18, has been forming a clearly defined head-and-shoulders. A break could come on the back of today’s gap-down if it holds.

A cross below the neckline will have 2790 (bottom of a thin support band) in focus. A decline below this threshold could quickly bring into play the trend-lines from April/May (2755/65). A failure to break the neckline and support keeps the market afloat for now.

Traders remain short the S&P 500, but starting to cover - check out the IG Client Sentiment page to see how this acts as a contrarian indicator.

S&P 500 Daily Chart (Support band, trend-line)

S&P 500 daily chart, support band, trend-line below

S&P 500 Hourly Chart (Head-and-shoulders)

SPX 500 hourly chart, head-and-shoulders pattern

The Nasdaq 100 started the current decline on Facebook’s 19% hit on earnings last week. Support was broken around 7300, which put to test the April trend-line. The bounce so far off trend support has been fairly tepid, increasing odds we see a break of t-line support and the weekly low at 7158.

A breakdown will have a solid 200 points of open space for the NDX to trade lower, with support arriving via the late-June low at 6950. A hold of trend support will at least stave off selling for now, but the area around 7300 will need to be overcome if upward momentum is to resume.

Nasdaq 100 Daily Chart (Trend-line at risk of breaking)

Nasdaq 100 daily chart, trend-line at risk of breaking

If you’d like to listen in on live technical analysis on global equity indices (and commodities), join me every Tuesday at 9 GMT time.

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---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.