Technical Analyst, Saxo Bank
Under heavy volume the sell-off in S&P 500 resulted in the Index closing below the 0.382 retracement confirming down trend (lower lows and lower highs). RSI is still above 40 i.e., positive sentiment but likely further selling pressure is to push it below in negative territory.
Support at 3,981. Stronger support at around the 0.618 retracement and 3,910.
To reverse the trend a close above 4,203 is needed.
Looking at the bigger picture on the weekly chart, rebound in S&P 500 has exhausted just below the 55 weekly SMA and below the 0.618 retracement level at 4,367. That doesn’t bode well for the coming weeks or months as the down trend seems to resume. If S&P 500 closes below 3,900 it is likely to test the June lows going into September at 3,636. A close below June lows, S&P500 is likely to be hit by heavy selling down to strong support around 3,200 i.e., around the 0.618 retracement and the low level of the consolidation area back in 2020 prior to market moving above pre-covid scare levels.
To reverse the medium term down trend a weekly close above 4,326 is a must.
Nasdaq 100 closed below 0.382 retracement Friday under heavy traded volume. The Index is set for a lower opening today with the Nasdaq 100 future trading 0.75% lower.
55 SMA and support at 12,379 is likely to be tested shortly. Key support at around 12,047 where a correction in this confirmed down trend is likely to be seen.
RSI still above 40 but if we see another negative end to the trading session today the threshold is likely to be broken. If Nasdaq 100 closes below 12,037 June lows are likely to be tested. Around the June low is a strong support level going back to the consolidation area in Q3 2020
Weekly chart shows that Nasdaq 100 exhausted at the 0.618 retracement of the Q2 sell-off and just below the 0.50 retracement of the H1 2022 bear move.
RSI is still above 40, however, but in negative sentiment since it has failed to close above 60 after closing below 40 back in April.
If RSI closes below its lower rising trendline we are likely to see much lower price levels on Nasdaq 100.
The consolidation area around 11K will be key for rest of 2022 market.
The Volatility Index VIX has dipped below 20 before bouncing. However, the value is still in the mid- 20’s i.e., not so fearful. At least not yet. If VIX moves above 30 the resistance at around 37 is likely to be tested. A close above could fuel further upside potential which means we are in fearful territory.
2024: The wasted year
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Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.