Dow Jones, S&P 500, Nasdaq 100 Technical Forecast: Neutral
- The Dow, S&P 500 and Nasdaq 100 made a net loss per week; but given the prevailing factors, the fact that the bulls did not fall more can be considered a victory for the bulls.
- While inflation and Powell were very focused this week, next week the focus has shifted to releasing U.S. revenues, with large caps reported.
- Despite another massive inflation print, Powell spent two days on Capitol Hill explaining why the Fed maintains Uber-Dovish’s political outlook. This helped to raise treasury yields to a lower level – a ten-year decline of less than 1.3%.
Well, it was a big week for drivers and again, inflation surprised the other way around. The US consumer price index released an eye-catching 5.4% on Tuesday, and stocks barely performed. In fact, just a few hours after its release, the S&P 500 was another fresh all-time high. This was perhaps due to what was on the economic calendar for the next two days, and it appeared FOMC President Jerome Powell as part of the FED bi-annual Humphrey Hawkins certificate.
On Thursday, after the closure of US markets, an interview with US Treasury Secretary Janet Yellen was broadcast, in which she said that she would see rapid inflation for several more months before price pressures eased. U.S. stock markets opened higher on Friday, prices continued to pull back after rising at the beginning of the week, and selling pressure remained throughout the session.
However, given its scope, the last two months have been rather meager, even by 2020, the definitions of the word. The Nasdaq 100 jumped as low as 15% from mid-May, and the June FOMC interest rate decision, where the bank received a little less, was a major leader. But that meeting was now a month ago, and at the end of this summer, the focus has shifted to risk events, such as Jackson Hole or the September FOMC interest rate decision, where the FOMC provides updated forecasts and forecasts.
And it highlights one of President Powell’s comments this week, taken from his prepared remarks before his release on Wednesday, which appears to be above most other headlines: “Labor market conditions continue to improve, but long way to go. Powell went on to point out that the Fed’s goal of making “significant progress” towards full employment and price stability is still the way to go.
This is the same rationale that has driven the markets over the past two months, and even though, despite another surprising inflation press, the Fed seems to be digging on its heels, little seems to have been done on this front.
In the high-flying Nasdaq 100, prices began to test bullish trend lines, which can be pulled from the May low. The 15k level has proven to be hard to break, and prices may need a deeper setback to wash out the recent long times before buyers can finally break through. The possible higher-low support location is about 14,540, but if it cannot survive, the 14k level will be left out as a possible reference point. Between the two, 14,216 have a 38.2% reversal of recent progress, and this will be an additional point of potential support.
Nasdaq 100 (NQ1) daily price chart
Dow Jones: The Return of Value?
While the Nasdaq 100 has risen as much as 15% from this May slump, bringing a series of fresh all-time highs, the Dow doesn’t have to take that previous May high.
But last week, the Dow saw a comeback when prices jumped to its previous high, just below 35,000 psychological levels, and that will rise next week. So oddly enough, the Dow may be in the strongest position among the three major US stock indices right now.
Dow Jones daily price schedule
The S&P 500 passes through the wedge
Last week, the S&P 500 was around a bit of excitement, with the index backing up on trend lines on Thursday. However, the Friday move following this sale was a clear rise in the candlestick, which pushed the price rise to the second trend line, helping to notice the resistance to the rising wedge pattern.
This bullish candlestick led to another force movement on Monday, with prices set at an all-time high, the second appearing on US markets on Tuesday a few hours after the 5.4% CPI print.
Although ascending wedges are often approached to reverse the descent, given the length and strength of the movement, there is no descending trigger yet. To create this scenario, traders are likely to want to look below for short-term support around the 4280 test, followed by a longer-term support test of about 4127. About this may start to reverse the framework.
S&P 500 daily price chart
– Written James Stanley, Senior strategist to DailyFX.com
Get in touch and follow James Twitter: @JStanleyFX