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Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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Technical Update - Nasdaq and S&P 500 struggling for momentum. Dow Jones forming top and reversal pattern
Kim Cramer Larsson
Technical Analyst, Saxo Bank
Nasdaq 100 rejected at 12K, struggling to turn to positive sentiment
S&P500 rejected at 4K. Can it break it?
Dow Jones Index forming THREE top and reversal candles
Nasdaq 100 opened higher yesterday but buyers couldn’t keep it up closing the Index below 12K. That also resulted in RSI again being rejected at 60 threshold (circled) i.e., still showing negative sentiment.
The RSI rejection and the Index close below 12K also mean that Nasdaq is struggling to unfold its potential Double bottom target at 12,500-13,000 let alone talking about a test of the medium term-(black) falling trendline. For Nasdaq 100 to unfold its potential a close above 12,025 is needed. If that occurs Nasdaq is set for 12,468 which is the 0.618 retracement (blue sets of Fibonacci levels) of the August to October downtrend. Minor resistance at around 12,080.
If Nasdaq slides back below support at 11,681 selling pressure could resume pushing Nasdaq lower resuming bear trend.
S&P 500 was rejected at the 0.618 retracement to close below 4K. S&P 500 must close above 4,029 to regain upside momentum for a test of the upper medium-term falling trend line and strong resistance at around 4,119. The daily 200 SMA will also provide resistance.
RSI is above 60 indicating S&P 500 technically could move higher but it seems to be a struggle.
If the Index slides back below 3,911 the gap is key area. A close below the lower trendline in the short-term rising channel would be an indication of the uptrend to be over. A close of the gap will be confirmation the bear sentiment to resume.
Dow Jones Industrial Index seems to exhaust its uptrend. There is divergence on RSI i.e., trend is weakening and two failed attempts to close above 34K.
A Hanging Man candlestick followed by a Shooting Start and Spinning Top indicates top and reversal. It is very rare to see three Candles like that in a row.
If Dow Jones closes lower today the top and reversal pattern has been confirmed. A lower close that also closes below the medium-term falling trendline and the short-term steep rising trendline will further add to the top and reversal picture. A reversal with support around 32K. A daily close below 32,513 is likely to accelerate selling.
A close above 33,988 will cancel out the top and reversal picture and Dow is likely to spike higher to resistance around 34,281 but with potential to around 35,300.
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