Technical Update - S&P500 & Nasdaq100. Bottom and reversal pattern indicates short term rebound
Kim Cramer Larsson
Technical Analyst, Saxo Bank
Summary: US Equities ended Friday strongly forming a bottom and reversal pattern indicate a nice rebound to expected. Overall trend is still down , however.
Friday S&P 500 reached and tested 3,815 support as mentioned few weeks ago it was likely to do in May. Trading session ended on a strong note forming a Hammer candle (occurs in a down trend where lower shadow – or wick – is 2-3 times the height of the body with no or little upper shadow) which is bottom and reversal indicator. With divergence on RSI a rebound is likely that could take S&P500 towards 4,100 before selling pressure is likely to resume.
The overall trend on Weekly and Monthly is still down. 3,815 level is strong support. If a daily close below next strong support is around 3,500.
Weekly RSI is testing lower falling trend line in the falling channel and a short term rebound might not be enough for RSI to test upper falling trend line
Nasdaq 100 staying within the steep falling channel. However, divergence on RSI indicates we could see a rebound towards 13K which is the 0.382 Fibonacci retracement of the falling channel. Nasdaq is likely to be rejected at or below 13K and selling pressure to resume.
On weekly Nasdaq 100 has closed below strong support at around 12,208 bouncing off 0.50 Fibonacci retracement. No strong support before around 11K.
VIX Index (“Fear Index”) . Despite the bearish moves in Equities VIX is still only slightly elevated showing a slightly rising trend. If VIX closes above 37.50 we are entering big fear levels.
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