S&P 500, Nasdaq 100, Dow Jones Talking Points

We’re not quite two weeks into Q2 trade and, so far, it hasn’t been a great outing for stocks. The S&P 500 set its most recent three-month-high in the final days of Q1 and since then sellers have started to return in a manner similar to what was on display ahead of the FOMC rate hike last month.

But, after the Fed hiked by only 25 basis points while avoiding the topic of Quantitative Tightening, stocks ripped for the next two weeks with the Nasdaq 100 tacking on a whopping 17.92% in less than two weeks. The S&P 500 gained a more modest 12.14% from that March low up to the March high but, already we’ve seen 50% of that move erased. The 50% retracement of that move plots right at 4380 and this is the price that’s been holding the lows in the S&P 500 over the past couple of days.

That level syncs up with another level of interest, plotted around 4377, which is a Fibonacci level taken from a longer-term setup. This zone has come into play after a descending triangle had set prior support around 4445, which was breached after this week’s open.

S&P 500 FOUR-HOUR PRICE CHART

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

S&P 500 LONGER-TERM

The concern at this point from the daily chart would be short-term oversold conditions. There’s been a stark change-of-pace around this quarter’s open and this means that there’s likely many traders that are looking to play reversals after a strong sell-off . And from the daily chart below, we can see where this current support zone was resistance in late-February and early-March, which keeps the door open for short-term bullish scenarios that could ease those shorter-term oversold conditions showing in the index, which could then re-open the door for longer-term short scenarios.

For near-term resistance, 4425 and prior triangle support loom large at 4445. For deeper support, the area from 4321-4325 looms large, after which the 4281 level comes into view.

S&P 500 DAILY PRICE CHART

Chart prepared byJames Stanley; S&P 500 on Tradingview

NASDAQ 100 STALL AT MAJOR ZONE

In the Nasdaq 100, the index came into Q2 carrying a double top formation, which can be a sign of possible bearish reversals. Resistance had held strong around 15,300 over two separate occasions and support for the formation, called the ‘neckline’ was well formed around the 13K handle that proved really tough to break last year.

For the formation to come into play support would need to be breached at the neckline, which opens the door for a potentially large move. Some traders will build target projections for double top formations by calculating the difference from the top the neckline, and then looking for a move of that size. And with resistance at 15,300 with support around 13K, that would mean approximately 2,300 points of target potential below that support zone, which would project to approximately 10,750.

That level is right around the 38.2% retracement of the post-Financial Collapse move and this is a zone that was functioning as resistance turned support in the second-half of 2020 trade.

NASDAQ 100 DAILY PRICE CHART

Chart prepared by James Stanley; Nasdaq 100 on Tradingview

NASDAQ 100 SHORTER-TERM

Before the neckline of that double top might ever come into play, the Nasdaq 100 is going to have to deal with a stubborn spot of support that’s shown up around the 14k handle. The levels of 13,900 and 14,059 have had some pull on price action going back to last year.

The former of those levels came into play as the February 2021 swing high while the latter level helped to cauterize resistance in April before bulls forced a breakout later that summer.

This same area came into play as support in January before showing short-term resistance in February. Bulls forced a breakout from this zone after the FOMC rate decision but, already prices are back to testing support in this key area on the chart. It’s so far stalled an aggressive sell-off but there’s little sign at this will function as more than a speed bump.

Near-term resistance potential exists at 14,184 and then the zone from 14,375-14,500. For bulls to get back in the driver’s seat, they’d likely want to see a closed daily candle through that 14,500 level.

NASDAQ 100 DAILY PRICE CHART

Chart prepared by James Stanley; Nasdaq 100 on Tradingview

DOW JONES

I have the Dow in what looks like the least bearish position of the three major US indices. But, that said, it also put in a less emphatic jump after the FOMC rate hike, gaining a more modest 8.3% v/s the 12% and change in the S&P and the near 18% in the Nasdaq 100.

At this point, the Dow is trying to hold support around prior resistance, taken from around 34,133-34,249. The recent pullback has shown in a somewhat orderly fashion, taking on the appearance of a falling wedge that’s playing as a short-term bull flag.

DOW JONES FOUR-HOUR PRICE CHART

Chart prepared by James Stanley; Dow Jones on Tradingview

--- Written by James Stanley, Senior Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX