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Price analysis and trading outlook for the SP500 Nasdaq and Dow indices

In this article we take a technical analysis trading view of how events are currently shaping movements in major US indices, the S&P500, Nasdaq100 and Dow Jones Industrial Average.

Key market themes out of the US, such as the time line towards tapering & raising interest rates, the debt ceiling and infrastructure bill vote have seen short term volatility on the rise.

The below daily charts all make use of the following technical indicators:

Red line: 20 day simple moving average (20MA)

Green Line: 50 day simple moving average (50MA)

Blue line: 200 day simple moving average (200MA)

Lower indicator window: Stochastic (14,3,3)

The S&P500 (US 500)

The recent pullback from the 4550 high sees the S&P 500 price having made a new short term low at 4275. The move lower also now sees the 20MA trading below the 50MA. This suggests that the short to medium term trend is no longer up. The price above the 20MA cautions us from calling this trend down (but it is not up).

The price does however still trade above the 200MA, which suggests that the longer term uptrend remains intact for the time being.

Putting these indications together we can say that we have had a short to medium term correction of the longer term uptrend.

Levels 4275 (support) and 4475 (resistance) provide a shorter term range for the index.

Uptrend confirmations

For renewed faith that the correction is over and short to medium term uptrends are resuming in line with the longer term uptrend still in place, we would like to see the price breaking above short term resistance at 4475, supported by a bullish cross of the 20MA and 50MA.

Trend reversal considerations

For a bearish trade bias consideration, we would like to see the price of the index instead moving to break both the short term range support level and the 200MA. This could suggest either the start of a longer term trend reversal (from up to down) or broader sideways consolidation.

Dow Jones (Wall Street)

The chart of Wall Street is similar to that of the S&P500, in that the moving averages show a short to medium term correction of the longer term uptrend.

Levels 33530 (support) and 34870 (resistance) provide a shorter term range for the index.

Uptrend confirmations

For renewed faith that the correction is over and short to medium term uptrends are resuming in line with the longer term uptrend still in place, we would like to see the price breaking above short term resistance at 34870, supported by a bullish cross of the 20MA and 50MA.

Trend reversal considerations

A bearish trade bias would be considered should we see the price of the index instead moving to break both the 33530 short term range support level and the 200MA. This could suggest either the start of a longer term trend reversal (from up to down) or broader sideways consolidation.

Nasdaq (US Tech)

The chart of the Nasdaq is similar to that of the S&P500 and Wall Street indices, in that the moving averages show a short to medium term correction of the longer term uptrend. It should however be noted that the shorter term correction has been more pronounced on the Nasdaq than the other two index peers.

Levels 14390 (support) and 15400 (resistance) provide a shorter term range for the index.

Uptrend confirmations

For renewed faith that the correction is over and short to medium term uptrends are resuming in line with the longer term uptrend still in place, we would like to see the price breaking above short term resistance at 15400, supported by a bullish cross of the 20MA and 50MA.

Trend reversal considerations

A bearish trade bias would be considered should we see the price of the index instead moving to break both the 14390 short term range support level and the 200MA. This could suggest either the start of a longer term trend reversal (from up to down) or broader sideways consolidation.

In summary:

  • The moving averages show a short to medium term correction of a longer term uptrend currently in play on the S&P, Nasdaq and Dow Jones indices
  • For the short to medium term trends to align with the longer term uptrend we would like to see a break of resistance and a bullish cross of the 20MA and 50MA on these indices
  • Should the prices of these indices instead move to break range support and the 200MA, this could indicate the end of the long term uptrend and in turn, either a broad sideways consolidation or new downtrends for these indices

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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