U.S. Indices Technical Highlights:
- S&P 500 surges off support, new record high near
- Dow Jones finds significant support around the 200-day
- Nasdaq 100 top of channel test nearing again
Dow Jones, S&P 500, Nasdaq 100 Forecast: Stocks Staring at New Highs
Momentarily the S&P 500 broke the old high created in September, tagged the trend-line from October 2020, and then sprung higher. The volatility around the old high and trend-line were cues that something like this could happen.
The October trend-line, which previously had the bare minimum to make up a trend-line given it had only two connecting points, has now been validated as a truly meaningful line of support. Should we see a revisit of that line in the near future it could hold a good risk/reward opportunity for fresh longs.
Right now a test of the trend-line doesn’t look likely. Stocks are strong and near highs, in aggregate. The momentum has been fierce coming out of the low, which is normal, now stock momentum is likely to diminish as new highs come into focus. A new record will be recorded once the SPX breaks 4743.
For now, looking for stocks to trade to new highs, it appears a Santa rally may be in the works. Until we see pervasive price action that takes out key line and levels, there appears to be no reason to be bearish at this time.
S&P 500 Daily Chart
The Dow Jones behaved around the 200-day moving average in very typical fashion. This is what was said last week, “We may see a solid push through the 200 initially, tag off of support below, then reversal higher.” That is exactly what happened. On Dec 1 we saw a slice through the 200-day to support beneath it followed by a recovery beginning the following day. The current leg higher is set to run with less steam, but look for the old high at 36565 to come into play. Since April the Dow may undergoing a broadening top type of sequence, but we’ll leave that on the backburners until it becomes more relevant. For now, staying the course on the upside.
Dow Jones Daily Chart
Dow Jones Chart by TradingView
The Nasdaq 100 was putting in a head-and-shoulders pattern around the top of a channel dating to September 2020, but that idea was quickly put to rest once the old high in September was met and held. A top-side test here will be interesting, because it will mean that the top of the channel is coming under pressure again. Can the NDX leave the gravity of the channel, or will it continue to keep the rally contained? It’s a big question, because once price escapes the top of these kind of patterns we can see an impressive acceleration unfold thereafter.
Nasdaq 100 Daily Chart
Nasdaq 100 Chart by TradingView
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
