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U.S. Indices Technical Outlook:

  • Dow Jones from record to 200-day in one fell swoop
  • S&P 500 still has room to trade lower before hitting its 200
  • Nasdaq 100 trades to trend-line of big-picture wedge

See how the quarterly forecast has played out what it could mean for the big-picture – Q3 Equity Markets Forecast.

Dow Jones from record to 200-day in one fell swoop

The down-move in the Dow Jones has been vicious, with record highs only days ago just a stone’s throw away and now the index trading at the 200-day. To be fair, the 200 wasn’t terribly far away to begin with, but nevertheless the swoon has been swift.

In the near-term, watch for a bounce to develop as often times the 200-day at the least produces a good amount of volatility. A bounce may prove only temporary given how hard the break was and that it came right off the high and an important trend-line making up the top-side portion of a potential topping pattern in the form of a Reverse Symmetrical Triangle (RST) or Megaphone.

For now, watching how any recovery takes shape and then taking it from there. A fizzling bounce may present a continuation-style short trade, while a bounce and successful retest of a low could set up would-be longs for a larger recovery trade. Only potential scenarios for the time-being…

Check out the IG Client Sentiment page to see how retail traders are positioned and what it could potentially mean for various currencies and markets moving forward.

Dow Jones Daily Chart (200-day)

Dow Jones Tags 200-day; Technical Outlook for S&P 500, Nasdaq 100

Dow Jones Chart by Tradingview

Dow Jones Weekly Chart (RST/Megaphone)

Dow Jones Tags 200-day; Technical Outlook for S&P 500, Nasdaq 100

The S&P 500 broke the trend-line off the December low, but still has room to the 200-day MA. It resides about 55 points lower than yesterday’s close. This leaves the index without the same kind of support that the Dow has, but it also might mean that the Dow will break the 200 with the broader SPX still having room to trade lower. The reaction to the sell-off should help provide some cues on what to do next.

S&P 500 Daily Chart (200-day below)

Dow Jones Tags 200-day; Technical Outlook for S&P 500, Nasdaq 100

S&P 500 Chart by Tradingview

The break in the Nasdaq 100 has it trading at the trend-line off the December 2018 low, which also makes up the bottom-side of a rising wedge pattern dating back to the second-half of last year. A break of the formation could really get the market reeling, as the NDX is home to FAANG (Facebook, Apple, Amazon, Netflix, Google), the bull-market darlings that have been failing to lead the market as they once did.

It’s been viewed as a sign of deteriorating market health (along with the Russell 2k lagging and other breadth indicators). This break may be the beginning of confirming the recent divergences we’ve been seeing, and mark the first shot of what will turn into a theme of bearishness.

Nasdaq 100 Daily Chart (t-line, bottom of larger wedge)

Dow Jones Tags 200-day; Technical Outlook for S&P 500, Nasdaq 100

Nasdaq 100 Chart by Tradingview

To learn more about U.S. indices, check out “The Difference between Dow, Nasdaq, and S&P 500: Major Facts & Opportunities.” You can join me every Wednesday at 10 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

Whether you are a beginning or experienced trader, DailyFX has several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX