S&P 500, Nasdaq Analysis
- US indices off to a slow start – Tesla down after Chinese vehicle discounts
- US PPI, Treasury yields and the US dollar weigh on US stocks
- The analysis in this article makes use of chart patterns and key support and resistance levels. For more information visit our comprehensive education library
US Indices off to a Slow Start – Tesla Down after China Vehicle Repricing
Tesla announced it was cutting prices of its popular Model Y offering in the competitive Chinese market for electric vehicles. The move has been prompted by a tricky trading environment, as the Chinese economy faces a number of challenges to the highly anticipated economic rebound. Economic data since Q1 has placed the recovery in doubt.
The manufacturing sector continues to contract, exports and imports declined in July and according to the latest inflation report, deflation appears to be setting in. Tesla gapped lower at the start of trading but has attempted to bridge the gap since. The June swing low will be telling as it serves as a tripwire for potential continued selling.
Tesla Daily Chart
Source: TradingView, prepared by Richard Snow
US PPI, Treasury Yields and the Dollar Weigh on US Stocks
Friday’s hotter than expected PPI print resulted in further rising US 10-year yields which supports the US dollar. Such a result typically weighs on indices as rising risk-free rates carry a more attractive yield and, as the name suggest, its as close to risk free as you can get. US 10-year yields approach levels last seen at the end of October – the highest since 2007/2008.
A lack of high importance US data this week leaves US indices looking for direction. One thing markets will get clarity on this week is the state of the US consumer, with US retail sales data and earnings updates from Target and Walmart.
The S&P 500 recently broke below trendline support – highlighting the potential for an extended pullback. The June 16th high at 4450 appears to have provided a level of support as price action now tests the trendline resistance (former support). The MACD highlights the bearish momentum which remains in play, resulting in renewed interest in trendline resistance. If broken with momentum, 4450 is followed by 4325 on the downside. A move and close above trendline resistance highlights the yearly high of 4607.
S&P 500 Daily Chart
Source: TradingView, prepared by Richard Snow
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Nasdaq 100 Breaks Trendline Support
The Nasdaq (E-Mini Futures) chart reveals a very similar charting posture, although, only on Friday witnessed a break of trendline support. 14,853 is the tripwire for bearish momentum with 14,251 coming into focus thereafter. Tech stocks however, have been resilient in 2023 despite interest rates rising above 5%. As such, the outlook remains in favor of the uptrend. 15,260 is the immediate level of resistance followed by 15,710 and 16,062.
Nasdaq 100 Daily Chart (E-Mini Futures)
Source: TradingView, prepared by Richard Snow
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--- Written by Richard Snow for DailyFX.com
Contact and follow Richard on Twitter: @RichardSnowFX
