Macro: Sandcastle economics
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Technical Update - SP 500 and Nasdaq 100. Correction unfolding
Kim Cramer Larsson
Technical Analyst, Saxo Bank Group
Summary: A correction seems to be unfolding in the US Main Indices. With weekly charts in the process of forming top and reversal patterns , further 3%, maybe 5% down side could be seen
S&P 500/US500 cfd was yesterday hit by heavy selling. A correction seems to be unfolding. A correction that is likely to take S&P 500 to test the lower rising trendline and support at around 4,793.
A close below both could increase the selling pressure pushing S&P 500 down to test the key support at around 4,687
RSI divergence has been warning of an imbalance in the market, a looming trend exhaustion. And now it seems to be unfolding.
For S&P 500 to resume uptrend a close above 4,931 is needed
On the weekly chart S&P 500 could be forming a Bearish Engulfing pattern. For that to unfold a close tomorrow Friday below last week’s opening price at 4,853 is required
Nasdaq 100/USNAS100 is likely to be testing the support at around 16,963 following yesterday’s sell-off. The correction has been looming after RSI started to show divergence a few days ago. A correction is unfolding. A correction that is likely to test support at around 16,963. A close below is likely to push the Index lows to strong support at around 16,249 - 16,165.
The rising 55 DMA will offer some support which could limit the depth of the correction
Weekly Nasdaq 100 chart seems to be in the process of drawing a Doji Evening top and reversal like pattern – circled (ideally the body of the Doji – last week – and the body this week’s bearish candle should not overlap). Nevertheless, the top and reversal indication should not be ignored.
Combined with RSI showing divergence there is strong indicating of a larger correction.
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