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Macro Outlook: The US rate cut cycle has begun
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Chief Investment Strategist
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Technical Update - SP500 above 5K? Nasdaq100 eyeing 18K. Could Dow Jones reach 40K?
Kim Cramer Larsson
Technical Analyst, Saxo Bank
Summary: US Indices resumed uptrend Friday lifted by huge jump in large caps. Technical patterns are indicating higher Index levels while Indicators are sending mixed signals. The trend is your friend - for now
S&P 500/US500, Nasdaq 100/USNAS100 and Dow Jones/US30
S&P 500 forgot all about being in a correction mode and propelled higher Friday lifted mainly by Meta, Amazon and Nvidia.
Uptrend has resumed but RSI divergence persists i.e., the strength indicator is not fully supporting the bullish trend. However, the trend is your friend and divergence can be traded out.
S&P 500 is likely to test 5K possibly spiking to 4,110 level but for RSI divergence to be cancelled an RSI close above the horizontal dashed line is needed.
First indication of that scenario potentially to play out is an RSI close above its upper falling trendline.
However, on the weekly chart there is no RSI divergence suggesting S&P 500 can move higher in coming weeks – RSI has simply cancelled its divergence by closing above the horizontal dashed line 200% of the Q3 correction is at 5,110.
One could argue that the weekly chart of S&P 500 has formed a Cup and Handle behaviour. The Cup (from Q12022 through Q3 2023) should be more rounded to form a textbook pattern. However, the behaviour has been there and the Handle is quite visible.
A potential price target based on A cup and Handle pattern is illustrated by the two vertical arrows i.e., 5,722. However, since the pattern is not of high quality and based on statistics the price meeting target is more likely to be around 0.618 at 5,296 (Bulkowski thepatternsite.com has calculated it to be 61% of the bottom of the Cup to top of the Cup i.e., the arrows.
A close below 4,682 is demolishing the bullish scenario. First indication of that scenario to play out could be S&P500 closing below 4,854 combined with an RSI close below its lower slightly rising trendline thereby also closing below 60 threshold.
Join my webinar Tuesday where I will discuss the pattern behaviour https://www.home.saxo/campaigns/webinars/2024/02/06/technical-update---feb
US500 cfd:
Nasdaq 100 closed at its highest level ever Friday. However, it is occurring under massive RSI divergence but the traded volume has been rising all January. Bottom line indicators are not agreeing. But the trend is your friend and with the price action Friday the top and reversal pattern seems to be cancelled.
Nasdaq 100 has formed similar Cup and Handle patterns as S&P 500 (naturally) indicating a move to 18K is likely.
However, if Nasdaq is to move similar “Cup and Handle” distance as S&P 500 the Index is looking at 19,325 i.e., the 0.618 projection level.
There is divergence on the weekly RSI but is it close to be traded out. That will occur if RSI is closing a week above its horizontal dashed line
For Nasdaq 100 to demolish this continued bullish picture a close below 16,249. First indications of that scenario to play out would be a close below 16,963 combined with an RSI close below its lower rising trendline on Daily chart
USNAS100 cfd:
Dow Jones Index seems likely to test 39K shortly but could shoot up to 40K.
However, there is massive RSI divergence on the daily chart indicating a stretched uptrend.
However, weekly chart has no RSI divergence indicating higher levels so maybe we could spike up to 40K
A close below 37,073 will demolish the bullish trend short- and medium-term US30 cfd
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