Indices Technical Forecast: Neutral
- S&P 500, Nasdaq & Dow technical trade level update – Weekly Charts
- SPX500 support 3734, 3665, 3501- resistance 3906, 4089-4179, 4368/76
- Nasdaq support 11119, 10589, 9206/446- resistance 12208, 12668, 13225
- Dow support at 29794, 28323, 27583/919- resistance 31392, 32272/375, 33271
A volatile month in stocks keeps all three major equity indices within a well-defined monthly range heading into next week. While the broader technical outlook remains tilted to the downside, the threat of a larger recovery within the broader downtrend rises heading into the close of the month and the battle lines are drawn.These are the targets and invalidation levels that matter on the S&P 500 (SPX500), Nasdaq (NDX) and the Dow Jones Industrial Average (US30) weekly technical price charts. Review my latest Strategy Webinar for an in-depth breakdown of these technical stock setups and much more.
S&P 500 Price Chart – SPX500 Weekly
Technical Outlook: In last month’s S&P500 Weekly Technical Outlook we noted that, “A three-week decline takes the S&P 500 into support here at the 2021 lows- looking for possible near-term inflection here next week. Rallies should be capped by 3906 IF price is heading lower on this stretch with a close below 3665 still needed to mark resumption of the broader downtrend toward 3500.” The index held that low with price ranging between 3665-3906 for the past four weeks. The focus is on a breakout of the July opening-range for guidance with the broader yearly decline vulnerable in the medium-term while above the objective 2021 yearly open at 3734.
A topside breach would threaten a larger recovery within the broader yearly downtrend with such a scenario exposing topside resistance at the 38.2% retracement of the yearly range (4089) and the May high/low- week reversal close at 4179– both levels of interest for possible exhaustion IF reached.
Broader bearish invalidation now lowered to the 61.8% retracement / 52-week moving average at 4368/76. Initial weekly support rests at 3734 with a break / close below 3665 needed to keep the focus on key support zone at 3419-3501.
Bottom line: The immediate focus is on a breakout of the monthly range with the threat for a larger bear market recovery in the medium-term. Review my latest S&P 500 Short-term Technical Outlook for a closer look at the near-term SPX500 technical trade levels.
S&P 500 Trader Sentiment – SPX500 Price Chart
- A summary of IG Client Sentiment shows traders are net-long the S&P 500- the ratio stands at +1.34 (57.30% of traders are long) – typically a weak bearishreading
- Long positions are7.49% lower than yesterday and 0.22% higher from last week
- Short positions are5.79% higher than yesterday and 0.73% higher from last week
- We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests SPX500 prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. From a sentiment standpoint, the recent changes in positioning warn that the current S&P 500 price trend may soon reverse higher despite the fact traders remain net-long.
Nasdaq 100 Price Chart – NDX Weekly
Notes: Nasdaq rebounded off confluent support at the lower parallel / September 2002 low-week close at 11119 into the close of June. Since then, the index has held a well-defined monthly opening-range just below the 2021 swing low at 12208 – we’re looking for a break of this range for guidance. Ultimately, a topside breach / close above the 2021 low-week close at 12668 would be needed to suggest a larger recovery is underway here towards the 38.2% retracement of the yearly range at 13225. A break / close lower keeps the focus on key support at the 61.8% Fibonacci retracement of the 2020 rally at 10589– look for a larger reaction in price there IF reached.
Bottom line: A rebound off downtrend support still resist a test of downtrend resistance at the upper parallel. From a trading standpoint, the focus is on a breakout of the 11119-12208 range for guidance with bearish invalidation lowered to 12668.
Dow Jones Industrial Average Price Chart – US30 Weekly
Notes: The Dow has been trading within the confines of this descending pitchfork formation extending off the 2021 high with pullbacks defending the median-line for the past three weeks. Initial weekly resistance steady at 31392 backed by 32272/375– a region defined by the upper parallel / February low and the 100% extension of the June recovery. A breach / close above this threshold would be needed to suggest a larger recovery is underway (also an area of interest for possible topside exhaustion IF reached). Initial support rests at 29794 with a break lower threatening resumption of the broader downtrend towards the November 2020 uncovered gap at 28323 and the Fibonacci confluence at 27583/919.
Bottom Line: The Dow has recovered off downtrend support and still threatens a test of downtrend resistance before resumption. From at trading standpoint, rallies should be capped by 32375 IF price is indeed heading lower with a break likely to fuel another accelerated decline towards 28000.
For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy
Active Weekly Technical Setups
-Written by Michael Boutros, Technical Strategist with DailyFX
Follow Michaelon Twitter @MBForex