S&P 500, Nasdaq, Dow Jones Forecast: 200 DMAs in Play

Indices Talking Points:

• US equities put in a pullback this morning with the S&P 500 finding support at the 200-day moving average. The Nasdaq is holding trendline resistance with the next significant spot of resistance at the 200-day moving average. And the bullish trend in the Dow that led the way higher in Q4 remains on its back foot, with the 200 dma as a key invalidation level for bulls.
• The S&P and Nasdaq have both put in signs of strength lately, but we’re getting into the thick of earnings season now and this afternoon brings Tesla’s quarterly earnings announcement, which can help to keep tech very much in the spotlight.
• The analysis contained in article relies on price action and chart formations. To learn more about price action or chart patterns, check out our DailyFX Education section.

The S&P 500 started this week by pushing up to a fresh monthly high on Monday but, since then, bulls haven’t been able to do much. Yesterday’s daily candle in S&P 500 futures printed as a doji and an inside bar and in early trade this morning, prices have continued to pull back, with support showing around a familiar spot at 3970.

At issue in the S&P 500 right now is the 200 day moving average, which is confluent with that spot of prior resistance-turned-support at the 3970 level. That has so far helped to hold the lows today and after the higher-high on Monday, this retains short-term bullish trend qualities.

S&P 500 Four-Hour Price Chart

Chart prepared by James Stanley; S&P 500 on Tradingview

Longer-Term

On a longer-term basis there’s considerable resistance sitting overhead, and bulls will have their work cut out for them if they can push up for another re-test of the 4100 level. Nonetheless, the short-term extension of higher-highs and lows keeps bulls in the driver’s seat for now, and the 3912-3928 zone that helped to hold last week’s lows becomes an area of interest for those looking to gauge when/if bulls might be losing control of the matter. Below that zone, 3867 is of note, after which the same 3802-3810 zone that held the lows into the yearly open comes back into view.

S&P 500 Daily Price Chart

Chart prepared by James Stanley; S&P 500 on Tradingview

Nasdaq

The Nasdaq is showing a very similar setup as the S&P 500 above, with a breakout to a monthly high on Monday leading into indecision yesterday, which was followed by a bearish push this morning.

This sets up the possibility of an evening star formation but that’s contingent on sellers holding today’s move and, at this point, there’s some bounce showing from the familiar Fibonacci level at 11,700.

Resistance at this point is showing from a trendline taken from last March/April and August highs, which came into play to hold the highs again yesterday. We’re getting some important tech earnings announcements over the next couple of days, and this can very much keep the Nasdaq in the spotlight.

Next resistance sitting overhead is at the 200-day moving average which is confluent with the recent group of price swings in the 12,118 area. For support, the 11,700 level is in-play today and below that, the next major level is the 11,294 spot.

Nasdaq 100 Daily Price Chart

Chart prepared by James Stanley; Nasdaq 100 on Tradingview

Dow Jones

Notably, while both the S&P and Nasdaq set fresh monthly highs yesterday, the Dow did not. Of course, we’re in earnings season and the index contains only 30 companies so it’s likely that there’s been some negative pull given a lower diversification profile in the index as opposed to the Nasdaq (with 100 companies) or the S&P 500 (with 500).

But, one of the key reasons for focusing on charts and data is to modulate the anecdotes, and the fact that the Dow very much led the way-higher when stocks were rallying in Q4 and is now on its backfoot is notable, and perhaps even a sign of a possible shift as earnings takes a heavier role in US equity price action.

From the daily chart below, we can see a symmetrical triangle showing up with both higher-lows and lower-highs over the past month-and-change. Price is very near the mid-line of that formation at the moment, which is a spot of support-turned-resistance-turned-support again, plotted at 33623.

Topside resistance is at 34,500, after which the 35k psychological level comes into play. Support plots at 33,053, with 32,789 just below that and if sellers can evoke a push below that level, the 200 day moving average comes into the picture as the next major obstacle, currently plotted around the 32,500 area.

Dow Jones Daily Price Chart

Chart prepared by James Stanley; Dow Jones on Tradingview

— Written by James Stanley

Contact and follow James on Twitter: @JStanleyFX