S&P 500, Nasdaq 100, Dow Jones Forecast for the Week Ahead

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Indices Technical Forecast: Bearish

S&P 500 broke-down forward of the Friday CPI launch.
Nasdaq 100 begins re-test of key assist that held the lows in Might.
Dow Jones seems poised to re-test the yearly low that was set in Might at 30,585.
The evaluation contained in article depends on price action and chart formations. To be taught extra about value motion or chart patterns, try our DailyFX Education part.

What’s within the field?

Properly, not stock prices, not anymore. U.S. equities displayed a shocking sense of calm for nearly 9 full buying and selling days, permitting for a rectangle formation to construct in each the S&P 500 and the Nasdaq 100.

Rectangles are mainly ranges however proven on a longer-term horizon. If a short-term vary develops and value bounces back-and-forth, and also you scroll again to an extended time-frame you’ll discover the field. And similar to short-term merchants will typically search for the breach of a variety to commerce a recent breakout, which may then grow to be a brand new development, longer-term merchants search for a breach of the field assist or resistance to open up a directional setup.

Those boxes broke with about an hour to go in Thursday’s session and the S&P 500 jumped all the best way down in the direction of the 4,000 psychological level. This was, after all, in anticipation of the Friday CPI report. And that Friday CPI report was fascinating because the headline portion of the report printed at a recent 40-year-high.

This units up for a troublesome backdrop for the Fed subsequent week and, larger image, for fairness bulls. I’ve followed this theme closely since late last year because the Fed was beginning to open the door for greater price coverage. And for Q2, I set the bearish side of stocks as my Top Trade and that’s a theme that I’m nonetheless following for lower-lows.

For subsequent week the forecast will likely be set to bearish as it seems that bears are again within the indices and the Fed has little selection however to hike charges whereas warning of quite a few further hikes within the effort of creating a dent on inflation.

S&P 500

I’m going to start out this with a clear weekly chart, highlighting a Fibonacci retracement that’s finished a extremely good job of guiding the transfer this yr. This retracement is an easy one that may be drawn from the pandemic lows in March of 2020 as much as the January excessive. The 23.6% retracement of that transfer began to come back into play in February and March of this yr to assist set assist.

However by late-April bears had already taken it out, and that transfer ran all the best way all the way down to the 38.2% retracement, after which a little bit of assist started to develop once more. As costs bounced, resistance performed in off of that very same 23.6% retracement that had set prior assist. This highlights vulnerability at that 38.2% retracement for subsequent week, which plots proper across the 3800 stage.

S&P 500 Weekly Worth Chart

Chart ready by James Stanley; S&P 500 on Tradingview

S&P Shorter-Time period

Getting a bit extra granular with the matter and the every day chart highlights a zone of assist working from that Fibonacci stage above at 3802 as much as 3830. A break under this zone exposes the following spot of assist, plotted at round 3664. Notably, the purple zone on the under chart is when the index goes again into ‘bear market territory.’

S&P 500 Each day Chart

Chart ready by James Stanley; S&P 500 on Tradingview

Nasdaq 100

I’m nonetheless following the Nasdaq 100 as a extra bearish situation than the S&P 500 checked out above. And I’ve made this comparability a number of instances over the previous couple of days nevertheless it’s value noting right here. Whereas the S&P 500 discovered assist on the 38.2% retracement of the pandemic transfer, with resistance taking part in in off of prior assist on the 23.6% marker – the Nasdaq was a step-lower on a really related theme.

The pandemic transfer within the Nasdaq is plotted on the weekly chart under, and assist right here played-in off of the 50% marker with resistance then exhibiting up on the 38.2% mark, which was prior assist in March.

This retains the door open for a steeper dive within the index.

Nasdaq 100 Weekly Chart

Chart ready by James Stanley; Nasdaq 100 on Tradingview

Nasdaq Shorter-Time period

On a shorter-term foundation the bearish transfer seems extra developed within the Nasdaq. Whereas the S&P 500 has a ways to go earlier than partaking with the highest of its assist zone at 3830, the Nasdaq 100 has already began to check that zone, which I’m marking at round 11,964. Costs penetrated that low throughout the Friday session and pulled up simply shy of one other Fibonacci stage at 11,837. This equally retains the door open for breakout potential into subsequent week because the Fed faces a stiff check on the Wednesday assembly.

Nasdaq 100 Each day Chart

Chart ready by James Stanley; Nasdaq 100 on Tradingview

Dow Jones

By comparability, the Dow has held up pretty properly, all elements thought of. Sticking with our apples-to-apples comparability of the main indices, I’ve added a Fibonacci retracement to the pandemic transfer spanning from the March 2020 low as much as the latest excessive.

Whereas the S&P 500 has discovered assist at its 38.2% retracement and the Nasdaq 100 on the 50%, the Dow Jones nonetheless has but to check the 38.2% marker. This might present a higher diploma of resiliency as the speed hike theme has taken center-stage thus far this yr and whereas the formation is much from bullish, it’s actually not as bearish as both of the above two setups within the S&P 500 or the Nasdaq 100.

Dow Jones Weekly Worth Chart

Chart ready by James Stanley; Dow Jones on Tradingview

Dow Jones Shorter-Time period

Might this lessened diploma of strain hold the door open for bullish approaches on the Dow? I’m not fairly there but and the every day chart holds the same bearish attract, albeit lower than what was checked out above. There may be, nevertheless, some reference for assist and resistance ranges.

The Friday plunge noticed the Dow peel all the way down to the 50% marker of the November 2020 – January 2022 main transfer. That stage plots at 31,393 and, thus far, that’s contained the lows. There’s a confluent stage simply above present value motion plotted from 32,408 as much as 32,676, and it is a zone that can be utilized for near-term resistance potential if a bounce does develop forward of the FOMC.

For underside – the swing stage at 30,512 stays key as consumers had are available in forward of a check there final month; and under that brings a 61.8% retracement at 30,109 which is adopted by the 30k psychological stage and one other Fibonacci stage at 29,671. A breach of assist at 30,512 opens the door for a run all the way down to the larger image assist zone within the Dow Jones.

Dow Jones Each day Worth Chart