Dow, S&P 500, Nasdaq 100 Forecasts: Support Holds Through Lift-Off

SPX four hour chart


Dow, S&P 500, Nasdaq 100 Talking Points:

  • U.S. equities are holding on to strong gains for this week with a big move showing after the FOMC’s Wednesday rate hike.
  • As looked at to start the week, there’s some major support in play on US equities and those areas in the Nasdaq 100 and Dow Jones led into a strong bounce this week.
  • While rate hike rallies aren’t unheard of, it’s the forward guidance and inflation expectations that carry consequence for future price action.
  • Chinese stimulus came back online in a big way this week, helping to propel Chinese ADRs listed on US exchanges while bringing reversals to the Hang Seng and mainland tech stocks.
  • The analysis contained in article relies on price action and chart formations. To learn more about price action or chart patterns, check out our DailyFX Education section.

It’s been a big week for stocks as buyers showed up in a big way on Wednesday afternoon, right after the Federal Reserve hiked rates for the first time since 2018. While the Fed tightened policy and warned of numerous additional hikes this year, an initial move of weakness after the statement was released was soundly reversed, and stock prices have continued to punch higher through Thursday and early-Friday trade.

Along with that reversal was some help from international markets: Before Wednesday Chinese tech stocks were in free-fall and in the states, there was a concern around Chinese shares listed on American exchanges. But, as covered by our own Brendan Fagan on Wednesday a stimulus move from China to pledge support for capital markets and the beaten down property sector helped to reverse the declines in the Hang Seng. And so far that’s helped, as the Hang Seng index is just under 20% off of the lows.

Also of issue is a massive triple witching option expiry hitting today. Of late, there’s been a tendency for volatility to show in a bearish manner around the third Friday of the month, when a mass of options expires. Could this be a hamstring for market performance as dealers look to hedge positions ahead of today’s close? And perhaps more importantly, could that lead to the onset of some volatility next week?

S&P 500

The S&P 500 is by 6.71% from this week’s low with the bulk of that move showing after the FOMC rate decision. The big technical even for the index this week was re-claiming the bearish trendline connecting January and February swing highs.

As of this writing, there is still some resistance playing in off of the 4400 psychological level, but there’s also been a hold of higher-low support after the initial inflection, which leaves the door open for bullish breakout potential ahead of the weekly close.

Beyond 4400, resistance potential exists around 4428, followed by 4462-4477, the latter of which is the current spot of the 200-day moving average.

For support structure, both the trendline projection and prior swing of 4377 have been at work, but for sellers to get excited they’d likely want to see a breach back-below 4354, after which 4325 and 4292 come into the picture.

S&P 500 Four-Hour Price Chart

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

Nasdaq 100

The Nasdaq 100 is up a whopping 9.71% from this week’s low, which showed in a key zone of support that straddles the 13k psychological level. I looked into this zone on Monday and it proved to be a strong spot of support as buyers launched a massive move this week.

But, given the penetration within the support zone and the slightly lower-low, this bearish theme may not be completely dead yet as a recurrent test of this zone could drive even deeper, possibly even bringing on a break. But, for right now that’s not what’s showing on price action as buyers have been hitting the bid on the Nasdaq 100 and this has created a breach of a key level around 14,059.

The next major spot of resistance ahead is a big one and that’s around 14,375. Just above that is another Fibonacci level at 14,500, and above that is a prior swing high plotted at 14,669.

For support, 13,900 remains of interest, after which 13,706 comes back into play, followed by a swing at 13,487.

Nasdaq 100 Four-Hour Price Chart

Nasdaq 100 four hour price chart

Chart prepared by James Stanley; Nasdaq 100 on Tradingview

Dow Jones

The Dow’s bounce from the lows has been less emphatic than that of the S&P of the Nasdaq 100, but as looked at on Monday the sell-off didn’t seem as threatening in the Dow as it did in either of those two indices. The Dow had held on to support around the 32,500 spot on the chart in February and early-May. This zone didn’t even come into play this week as buyers stepped up ahead of time, and after the FOMC rally prices jumped, eventually creating a fresh March high in the index.

At this point, there’s been a short-term range developing since that topside move yesterday and support is showing around the 14.4% retracement of the pandemic move in the index.

For resistance, 34,472, and 34,694 both set up ahead of the 35k psychological level. For support potential, the Fibonacci retracement at 34,133 is holding near-term lows and there’s another potential spot around 33,824. The bigger zone of support rests below around last week’s resistance, plotted from around 33,532 to 33,613.

Dow Jones Four-Hour Price Chart

Dow Jones four hour price chart

Chart prepared by James Stanley; Dow Jones on Tradingview

— Written by James Stanley, Senior Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

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