- Yesterday saw US equities selling off, with S&P, Nasdaq, and Dow plummeting to crucial support levels.
- Meanwhile, there’s no Fed speech this week to influence short-term trends. S&P and Dow test higher-low support, but Nasdaq contemplates a massive breakdown after printing a double-top pattern.
- This article evaluates chart setups and price action.
The United States equities saw another rough day, presenting continued pullbacks. Yesterday’s session saw S&P 500 prices dipping into support level at the psychological mark of 4K. Also, the zone comprised a FIB mark, meaning heightened chances to welcome bulls, and that zone largely contained early 6
December lows, at which bears ensured a massive push that dominated the session. The hourly chart shows bearish dominance as sellers pressed during today’s session, welcoming a support region with long-term consideration from 3912 – 3928.
S&P 500 Hourly Chart
Meanwhile, the present zone providing support has remained in play in several ways within the last seven months. For instance, it recently helped to form resistance before the S&P 500 broke from a descending wedge pattern amidst the November inflation data release.
That breakout triggered a higher high, then a higher low, formed at the 3912 – 3928 support region before buyers catalyzed another higher high. Last Thursday’s higher high emerged near the resistance of 4100 – where a bearish trend line projects.
The trend line joined S&P 500’s this year’s swing highs. And that helped to form the current 7-month high. Meanwhile, that trend line has seen bulls changing pace, especially this week, with the Federal staying at a blackout.
Dow futures gained over 20% from October’s low to Thursday’s peak. Meanwhile, the last few days have seen a pace change around the highs. Yesterday’s early pullback also secured support at a notable zone. Surprisingly, Powell’s last week’s appearance had a balance bias.
Nevertheless, the market response was far less as equities triggered an enormous ramp during Wednesday afternoon sessions after Powell’s speech, which welcomed Thursday’s peak. Nevertheless, the Fed Chai wasn’t overly dovish, and we can expect more next week.
That could have contributed to the extended rebound by the three indices from October lows. So, we can witness position squaring as we prepare for next week’s notable event – the FOMC rate decision. Dow enthusiasts should watch the 33,444 support level for near-term approaches. For bears or individuals that want to trade equity’s weakness, there could be redder (or greener) pastures elsewhere.
Nasdaq Double-Top Formation
While the Dow gained 21.2% from its October lows, Nasdaq saw a 15.85% surge as S&P 500 soared 17.36%. Meanwhile, the price structure remained more interesting. The Dow has jumped beyond its variation as S&P 500 approached the 2022 trend line. Nevertheless, Nasdaq sat far from a similar trend line, confirming the recovery struggle by the tech index.
Moreover, while S&P and Dow climbed to new peaks last Thursday, Nasdaq only revisited a high that persisted some weeks earlier. That welcomes a potential double-top pattern. The formation’s neckline would represent the lowest mark between the two peaks, and enthusiasts can watch 11,465.
Meantime, the pattern would require a bearish break to catalyze, but such a move might clear the gates for dips to 10,785. That might force us to watch a retest of the longer-term foothold that Nasdaq has found challenging to break.