Technical update of the S&P 500, Nasdaq 100 and Dax

Equities 5 minutes to read

Kim Cramer Larsson

Technical Analyst, Saxo Bank

Summary: Is this is? The big dive at the end of the mother of all bull runs? And is the 'sell in May and stay away" adage kicking in earlier than usual this year? Let's see what the charts have to say.

As mentioned during Friday's morning call the S&P 500 formed a bearish engulfing candle on May 1 (circled) which is an indication of a top and reversal. Over the past couple of months the Index has formed a wedge-like pattern where is tested the lower rising trend line on Thursday.

Stock markets have been ripe for a correction and with the news coming out this morning regarding US/China trade talks and Trump's tweets, now seem to be the time. Volume has been falling during the uptrend, which is a sign of imbalance in the market – fewer and fewer buyers pushing market higher.

Interestingly, there is no RSI divergence which some bulls might pin there hopes on. However, we can still see a top and reversal without RSI divergence.

Today, US stock markets are indicated to open lower after Asian and European markets have all been hard hit. Sell in May and go away seems to come early this year!

Whether or not this will be a larger correction is still too early to call but a drop over the next few weeks to around the 200-day simple moving average is not impossible. However, there will be some support at around the 2,800 level which is also the 0.618 retracement of the wedge.

For the market to show more of a correction and turn bearish again, a close below March low at around 2,722 is needed.

We can see an identical wedge pattern and falling volumes in both the Dow Jones and the Nasdaq 100. The latter index broke out bearishly from its rising wedge last week and combined with RSI divergence, this supports the top and reversal picture mentioned in Friday's morning call.

For the top and reversal pictures that we see across the major Indices to be demolished, a close above highs from last is needed. For the S&P 500, a close above 2,954 would reverse the correction picture.

Contrary to the big caps which have tested all-time highs, small caps have been struggling lately and have been nowhere near all-time highs.

The Index of US mid- and small caps, the Russell 2000, has formed what appears to look like an inverted Shoulder-Head-Shoulder pattern. It is not yet confirmed however, as the index hasn’t closed above the neckline. It was close on Friday but with markets indicating a lower opening that break seems to have been postponed (if not totally cancelled – time will tell).
The trend is still bullish but a close below 1,550 could lead to a further sell-off. Bear market if below 1,500.

russell 2000 — Russell 2000 daily chart. Source: Saxo Bank

The Dax touched the 12,430 resistance level on Friday and has opened significantly lower this morning with a huge gap. A correction down to 11,825 i.e. around the gap in April, is not unlikely. A close above 12,430 is needed to reverse the correction picture.

dax — Dax daily chart. Source: Saxo Bank

Tip: Did you notice there are colours added to the x-axis making it easier to read. It’s a new feature. You can find in the chart configuration dialog on SaxoTrader.

Quarterly Outlook Q1 2023: The models are broken

The models are broken
The market is trying to get back to the pre-Covid and pre-war times, but that model is broken. A new dawn is here and the financial world needs to adapt.

Steen Jakobsen,
Chief Investment Officer
Read article
Refitting China’s broken growth engine
A political switch in China towards less tough control of its people and companies may kick things back into gear.

Redmond Wong,
Market Strategist
Read article
Broken Europe
While the economic situation in Europe may not be as bad as feared, there's still a plethora of things to fix.

Chris Dembik,
Head of Macroeconomic Research
Read article
A painful phase transition
As the world turns increasingly bipolar, equity markets face harsh times as they transition into the new reality.

Peter Garnry,
Head of Equity Strategy
Read article
Opportunities in a deglobalising world
New alliances and collaborations outside of China may lead to prosperous times in Asia.

Charu Chanana,
Market Strategist
Read article
Is the ‘balanced’ 60/40 equity/bond portfolio a thing of the past?
For years, it was thought that the balanced portfolio was a thing of the past. But recent developments may have changed that.

Peter Siks,
Investment Coach
Read article
China reopening will drive another strong year for commodities
Following a dramatic and volatile 2022 with good returns, a lot of this year's commodity performance may be driven by Chinese politics.

Ole S. Hansen,
Head of Commodity Strategy
Read article
Latecomers to tightening party, EUR and JPY, may prove safest harbours in the first half
2023 could be a tough year for currencies but EUR and JPY may have some upside.

John J. Hardy,
Head of FX Strategy
Read article
China reopening a boon to Australian assets?
The commodity-heavy Australian market may have a good start to 2023, as the Chinese focus on growth signals demand for Aussie resources.

Jessica Amir,
Market Strategist
Read article
Can institutions save crypto before retail vanishes?
From a near-perfect environment for speculative assets before 2022 to the opposite, crypto faces fundamental challenges.

Mads Eberhardt,
Cryptocurrency Analyst
Read article

You can access both of our platforms from a single Saxo account.

Preview platform Open Account

Disclaimer

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 (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Manage Consent

Details Cookies

Important margin product information

Cookie policy

Necessary

Technical update of the S&P 500, Nasdaq 100 and Dax

Kim Cramer Larsson

Share

Latest Market Insights

Quarterly Outlook Q1 2023: The models are broken

The models are broken

Refitting China’s broken growth engine

Broken Europe

A painful phase transition

Opportunities in a deglobalising world

Is the ‘balanced’ 60/40 equity/bond portfolio a thing of the past?

China reopening will drive another strong year for commodities

Latecomers to tightening party, EUR and JPY, may prove safest harbours in the first half

China reopening a boon to Australian assets?

Can institutions save crypto before retail vanishes?

Your browser cannot display this website correctly.