S&P 500 and NASDAQ Composite Index Technical Outlook: Trying weak

S&P 500, Nasdaq – Technical Outlook:

• The S&P 500 is risking a break beneath the longer-term shifting common.
• The Nasdaq Composite Index carries the chance of one other leg decrease, presumably lasting just a few weeks.
• How a lot additional draw back is probably going and what are the important thing ranges to look at?

S&P 500 Brief-Time period Technical Outlook – Bearish

US fairness benchmark indices look weak as they take a look at key help, risking one other leg brief within the coming weeks.

The S&P 500 index is testing key convergence help on the 200-week shifting common, which roughly coincides with June lows of 3640. The index was decisively beneath the four-year shifting common in 2020 through the sell-off of the COVID-19 and the Nice Monetary Disaster of 2007-2009. Any break beneath might push the index in the direction of the 2020 excessive of 3394, adopted by the September 2020 low of 3249.

S&P 500 Day by day Chart

Chart created utilizing TradingView

There isn’t any signal of a reversal but, regardless of a 17% drop since August, regardless of a slight constructive divergence on the weekly chart (the falling index is related to a halving/rising momentum). The development stays bearish until the index is ready to break the rapid resistance finally week’s excessive of 3807. For medium-term draw back strain, the index would wish to rise above resistance on the 200-day shifting common (now round 4185). For now, the momentum on the month-to-month chart is pointing to additional weak spot.

NASDAQ Composite Index Brief-Time period Technical Outlook – Bearish

The Nasdaq Composite Index is threatening to interrupt beneath a reasonably sturdy help at its June low of 10565. A weak/shallow rebound break from August onwards will increase the probabilities of a draw back. If historical past is any information, a break beneath help might sign one other month or two of a downtrend (see chart).

NASDAQ Composite Weekly Chart

Chart created utilizing TradingView

The January decline from key help at October 2021 lows continued to weaken by mid-March. Equally, Might’s fall from February-March lows dragged the index down until mid-June. Due to this fact, any break beneath June lows means that the index could keep a gentle bias in the direction of the tip of the yr.

By way of the extent of the draw back, the January and March breakouts lower brief the transfer by round 12%-15%. Assuming the decrease finish of this vary, a possible goal would work round 9275. Robust help lies on the pre-Covid excessive of 9838. For a medium-term downtrend to reverse/reversal, at a minimal, the index wants to interrupt above the 200-day shifting common (now at round 12725) – two rebounds from the typical this yr have run out of steam.

— Written by Manish Jaradi, strategist at DailyFX.com