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Technical Update - SP500, Nasdaq 100 and Dow Jones Index. Correction or trend reversal?

Equities 3 minutes to read
Kim Cramer Larsson

Technical Analyst, Saxo Bank

  • US stock Indices have formed top and reversal patterns. A correction is likely to unfold. A correction that could turn in to a bearish trend if key supports are taken out 
  • In this article key levels for S&P 500/US500, Nasdaq 100/USNAS100 and Dow Jones/US30

S&P 500 yesterday formed an outside day in the form of a bearish engulfing top and reversal candle; sellers took control from the opening bell and kept it throughout the trading session.

The chart is now sending mixed signals. RSI is still showing positive sentiment with no divergence, i.e., not indicating uptrend exhaustion. However, the bearish engulfing candle is a strong and reliable top and reversal pattern, strongly indicating a correction is likely to unfold.

A correction could take S&P 500 down to support and the 0.618 retracement at 5,101, with some support at 5,193. A daily close below 5,100 could establish an actual downtrend with potential to fall below 5,000.

For S&P 500 to cancel the top and reversal pattern and extend its bullish trend, a daily close above 5,342 is required. If that occurs, S&P 500 could push higher to 5,457–5,502.

sp500 d 2405
Source all charts and data: Saxo Group
US500 CFD levels: Support at 5,185 and 5,085. Above 5,347, the uptrend extends.
us500 d 2405

Nasdaq 100 has formed a top and reversal candle. A correction is likely to unfold down to 18,168, possibly down to 17,808–17,712.

There is no RSI divergence, indicating this is merely a correction unfolding before the uptrend resumes. However, if Nasdaq 100 closes below 17,712, an actual downtrend could be in the cards.

A daily close above 18,908 will extend the uptrend with upside potential to 19,385.

nasdaq d 2405
US NAS100 CFD levels: Likely correction down to at least 18,186, but potentially down to 17,780–17,720. A close above 18,940 will extend the uptrend.
usnas100 d 2405
Dow Jones correction is unfolding likely down to strong support and the 0.618 retracement at 38,553.

If RSI closes below the 40 threshold, the sell-off is likely to continue down to 37,710.
dji d 2405
US30 CFD correction is likely down to the 38,605–38,573 strong support area.

A daily close below38,573 and US30 could dip down to 38,205.

A daily close above 40,079 will resume and extend the uptrend
us30 d 2405


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