S&P 500 Price Technical Outlook: Short-Term Trading Levels

  • S&P500Nasdaq & Dow Trade Level Technical Update – Weekly Charts
  • SPX500 down more than 10% from record high, break of support exposes 4197
  • Nasdaq tumbles nearly 16% from all-time high, drop exposes 12947
  • Dow down more than 8% from record highs to drop below -35512

Stocks have plunged this week with the S&P, Nasdaq and Dow down more than 2.1%, 2.3% and 2.2% respectively. The sell-off sent the indices to critical support levels with the threat of further losses in the last full week of trading in February. Is a bigger fix on the way? These are targets and invalidation levels that matter on the SPX500, NDX and US30 technical price charts in the week ahead. Review my last Strategy Webinar for an in-depth analysis of this S&P 500 setup and more.

S&P 500 – SPX500 Weekly Price Chart

Chart prepared by Michel Boutrostechnical strategist; SPX500 on Tradingview

Technical outlook: In my last S&P500 Technical Perspectives we noted that SPX had bounced off downtrend support and that, “a breakout/close above the upper parallel/Fibonacci retracement of 61.8% of the yearly range at 4592 would be needed to suggest a larger bottom is placed / validate a larger reversal.” The recovery has failed two consecutive weekly attempts to cross this threshold, with SPX attempting to break below key support at the end of the week at 4364/72– a region defined by the 61.8% Fibonacci retracement of the rally from late January and the 52-week moving average.

Weakness beyond this level threatens a new yearly low for the index with a Support seen at the 23.6% retracement of the entire 2019 rally at 4197– look for a bigger reaction there IF achieved. Monthly opening rresistance stands at 4500 supported by 4592– Ultimately a weekly breach/close above 2020 Median line (dotted red line) / record close week high at 4677 would be needed to firmly regain control of the bulls.

At the end of the line : The selloff in the S&P 500 is testing a key support zone and threatening a deeper decline within the broader 2020 uptrend in the weeks ahead. From a trading standpoint, a good area to lower protective stops – rallies should be capped by the monthly open at 4500 IF price heads lower on this stretch.

S&P 500 Trader Sentiment – US500 Price Chart

S&P 500, Nasdaq, Dow Technical forecast: The big plunge

  • A summary of IG Customer Sentiment shows traders are net long on the S&P 500 – ratio stands at +1.45 (59.20% of traders are long) – generally low bearishreading
  • Long positions are6.26% more than yesterday and 5.33% more than last week
  • Short positions are 2.10% less than yesterday and 0.79% more than last week
  • We generally take a contrarian view of crowd sentiment, and the fact that traders are net long suggests that US 500 prices may continue to decline. Traders are sharper than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger 500 US contrarian trading bias from a feeling point of view.

Nasdaq 100 Price Chart – Weekly NDX

S&P 500, Nasdaq, Dow Technical forecast: The big plunge

Chart prepared by Michel Boutrostechnical strategist; NDX on Tradingview

Remarks: A similar position here with the Nasdaq testing a break below confluent support on the April weekly close at 14041. Weakness beyond this threshold could be terminal for the 2020 uptrend and fuel another accelerated decline towards the 38.2% retracement of the 2020 advance at 12947. Watch this one outdoors next week. Initial resistance was aimed at the 25%/52-week parallel moving average around ~14715 short term bearish non-lowered invalidation at the midline / 50% retracement at 15245.

At the end of the line : The Nasdaq sell-off is trading at confluent uptrend support, with the decline approaching bear market territory again. From a trading perspective, a good area to reduce short exposure/lower protective stops – look for a reaction here. Gatherings should be capped by the mOnly open at 14966 IF the index is indeed heading down on this stretch.

Dow Jones Industrial Average Price Chart – US30 Weekly

S&P 500, Nasdaq, Dow Technical forecast: The big plunge

Chart prepared by Michel Boutrostechnical strategist; US30 on Tradingview

Remarks: the The technical data for the Dow seems crystal clear and while the index has fared much better than its peers (down only 8% from the highs), technical clarity is lacking. There is not enough evidence yet to back this slope, but the focus is on the break below the 52 week moving average with the 25% parallel just below.

Initial resistance back to the annual moving average near ~34668 supported by the 61.8% retracement at 35512. Wider bearish stable invalidation with the record close of the week high at 36240. A break of the January lows here would threaten to plunge towards the lower parallel which converges towards the 100% extension/23.6% retracement at 32049/537– look for a bigger reaction there IF achieved.

Conclusion: The Dow Jones remained rather resilient comparatively against the broader risk environment and while risk is weighted to the downside, technical clarity does not merit an aggressive stance here. From a trading standpoint, more chop is likely here, but for now the threat remains for a deeper dip below the midline. Stay tuned on this one.

For a full analysis of Michael’s trading strategy, see his Fundamentals of Technical Analysis Series on Bbuild a Jrading Sstrategy

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-Written by Michel BoutrosCurrency Strategist at DailyFX

To follow Michaelon Twitter @MBForex

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