What’s inside:
- U.S. indices drop hard on FOMC minutes last week, follow-through could be in store soon
- Nasdaq 100 putting in possibly bearish sequence on hourly, 5400 is big
- Dow has a key development underway resolution soon
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On Wednesday, US stocks were hit hard on the FOMC minutes. Since then, they have floundered around, doing little to reverse the swoon. This is setting them up for a leg lower if they can’t quickly gain traction. While all the indices are obviously highly correlated, the Nasdaq 100 and Dow are presenting the cleanest pictures at the moment, which we will use to help gauge where the broader SP 500 is heading over the short-term.
Nasdaq 100
The Nasdaq 100 has a clean head-and-shoulders pattern developing on the hourly chart, with a strong neckline right around 5400. This level has been in play since the first trading day of March. A swift break below 5400 will confirm the HS set-up and likely kick off a move to the downside towards the low 5300s, where the 3/27 swing-low sits at 5316 and near the upper parallel to the Feb ’16 trend-line. There should be decent support there, but should it break then we could see the broadening wedge on the daily act as a signal for a larger top. For now, though, our focus is on 5400. It is support until it isn’t, and for ‘would-be’ longs this isn’t a bad spot from a risk/reward perspective. A break below, an event which could very soon unfold, then favors shorts.
Daily
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Hourly
Created with TradingView
Dow
The Dow has a similar configuration, sans the spike and drop on the FOMC minutes, it is coiling towards the apex of a wedge on the hourly. Should the wedge trigger to the downside along with a break of 5400 in the Nasdaq 100, we should see good downside momentum come in across the board. A break higher out of the coiling pattern would put pause on the notion of seeing lower prices.
Daily
Created with TradingView
Hourly
Created with TradingView
SP 500
The fierce rejection from the trend-line running off the March high could be a second lower high in what may be a lower low, lower high sequence developing towards another drop. It, too, like the other indices has a similar short-term technical sequence with 2345 being a key point of support. A break below will also breach of the November trend-line and bring the 3/27 low at 2322 into focus. A close above the top-side trend-line on the daily and break above the 4/5 high at 2378 will negate the currently bearish tilt.
Daily
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Hourly
Created with TradingView
For a longer-term look at the indices, see our Q2 forecast in the Trading Guidessection.
—Written by Paul Robinson, Market Analyst
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