Technical Analysis Article Iages_1_1024x768M Technical Analysis Article Iages_1_1024x768M Technical Analysis Article Iages_1_1024x768M

Technical Update - US Indices: Pay attention to what the longer term charts tell you.

Equities 5 minutes to read
Kim Cramer Larsson

Technical Analyst, Saxo Bank

Pay attention to the longer term charts.

When the short term charts are quite volatile and seem to be without direction it is always a good idea to take a look at the bigger picture. Looking at the medium to longer term chart such as weekly and monthly time periods give us an idea .

S&P 500

Short term. The broad based S&P 500 index is testing the rising trend line. Earlier this week buyers  managed to move the Index back above the rising trend line paving the way for a minor rebound following last week’s sell-off.
However, that rebound doesn’t seem to last for long with sellers taking back control yesterday after positive opening to the session. S&P 500 to closed just a few points above the trend line.
Next couple of days can be crucial on the short term. A close below the rising trend line is likely to lead to a test of support at around 4,495.

SP500 D 14 Jan
Source: Saxo Group

However, as mentioned in the beginning pay attention to the medium/longer term charts. In the weekly time period last week S&P 500 formed a Bearish Engulfing top and reversal pattern. 
There is divergence on both RSI and MACD i.e. Index price went up but RSI and MACD values have been dropping in other words a warning of the uptrend being weak and possibly near an end. A close below 4,495 will confirm and possibly fuel a bearish trend.
A close above 4,750 will put the bearish picture on hold with the potential to test previous highs.

SP500 week 14 Jan
Source: Saxo Group


With lower Highs and lower Lows is Nasdaq 100 technically in a down trend on the short term Daily time period. It is much more pronounced on the broader Nasdaq Composite Index supporting the picture that it is mainly the big caps holding on.

Nasdaq 100 D 14 jan
Source: Saxo Group

On the weekly time period Nasdaq has formed both a Bearish Engulfing AND a Doji Evening star pattern. (The latter pattern is not text book perfect however, since the Doji star body should be above the body of the following bearish candle. However, the body of last weeks bear candle engulfs the Doji i.e. a bear pattern)

Similar to S&P 500 Nasdaq 100 and Composite (further below) both showing bearish divergence on RSI and MACD.
For Nasdaq 100 to reverse the bearish scenario a close above 16,608 is needed.

Nasdaq 100 w 14 jan
Source: Saxo Group
Nasdaq comp D 14 jan
Source: Saxo Group

Dow Jones Industrial seems to be forming a rising wedge like pattern. A daily close below 35,639 will confirm a bearish break out with support at around  34,700 and 34,000.
Divergence on MACD but not on RSI. However, RSI values have broken below the rising trend line and with divergence on MACD, and MACD line below the Signal line it indicates  to a bearish move on the Index. However, a daily close above 36,514 could lead to a test of previous highs.

DJI jan
Source: Saxo Group

RSI Divergence and trend sentiment explained: The RSI overbought/oversold indications are 70 and 30 respectively. But RSI can be used for much more than this.
When an indicator such as RSI is displaying lower peaks while the underlying price is still making new highs. It is a sign of imbalance in the market, the strength of the trend is weakening. It could be an indication of the ending of a trend. However, imbalances in financial markets can go on for quite some time. To cancel Divergence out RSI must either 1. Make a new high simultaneously with the price or 2. Close below 40 threshold. 
Same can be observed in bear market just here market makes a new low but Indicator doesn’t.
When the RSI crosses 60 and is moving in the 40-80 range it can be considered to indicate a bullish trend. When RSI crosses below 40 and is moving in the 20-60 range it can be considered to indicate a bearish trend.


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (
Full disclaimer (
Full disclaimer (

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15

Contact Saxo

Select region


Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.