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S&P 500/Nasdaq 100 Technical Highlights:

  • S&P 500 and Nasdaq 100 below critical trend support
  • Yesterday looks to have just been a retest
  • Amazon and Google continue FAANG weakness

With global stocks falling sharply, see how recent events fit into our outlook for the remainder of the year in the Q4 Global Equities Forecast.

S&P 500 and Nasdaq 100 below critical trend support

This week both the S&P 500 and Nasdaq 100 broke the significant combination of trend-line support from 2016 and 200-day MAs. The confluence between the two is something I have been watching as a bull market line-in-the-sand. Stay above and everything is ‘ok’, break below and much bigger trouble could be in store in the short-term term and looking out further.

The S&P already broke the trend-line a couple of times recently, but there was a channel extending higher from earlier in the year that still gave it some life. But with both the long-term trend-line and 2018 channel lines broken, looking lower support doesn’t arrive until around the Feb/March lows in the area of 2553/32.

Retail traders have been covering their shorts into the sell-off, see the IG Client Sentiment page for details as to what this may mean.

S&P 500 Daily Chart (below trend thresholds)

s&p 500 daily chart, below trend thresholds

The Nasdaq 100 joined in on the break of trend support this week too, and as discussed in early September this is a very important index because of ‘FAANG’, the bull market darlings, which makes up a large portion of the NDX. So goes FAANG goes the NDX goes the whole market.

Just after yesterday’s close Amazon (AMZN) and Alphabet/Google (GOOG/GOOGL) reported better than expected earnings, but the former missed on revenue and guidance while the latter also beat earnings estimates but reported weaker than expected revenues. This hit both stocks and the Nasdaq 100 futures by about 150 handles, or 2%.

It looks as though the bounce yesterday was nothing more than a retest of the broken trend-line/200-day combo. This week’s break and retest comes amidst a decline out of a large rising wedge on the weekly chart. Focus is on the lower portion of the pattern near the Feb/April lows in the 6325/6160 vicinity.

Nasdaq 100 Daily Chart (Retest of broken trend support)

ndx daily chart, retest of broken trend support

Nasdaq 100 Weekly Chart (Rising wedge in effect)

Nasdaq 100 weekly chart, rising wedge in effect

You can join me every Tuesday at 9 GMT for live analysis on equity indices and commodities, and for the remaining roster of live events, check out the webinar calendar.

Tools for Forex & CFD Traders

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---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX