Nasdaq 100 Broke Big Support, S&P 500 Teetering: Technical Analysis

U.S. Indices Technical Highlights:

• S&P 500 on the verge of breaking the March trend-line
• Nasdaq 100 already below March trend-line, may target long-term support

U.S. stocks are breaking down after undergoing what looked like a successful support test. The once-leading bull market darling Nasdaq 100 is trading below the March trend-line. FANMAG (FB, AAPL, NFLX, MSFT, AMZN, GOOG) and TSLA have been under some pressure recently, while old school names (i.e. Dow stocks) have been rallying. With the broader indices starting to roll over we could see a concerted stock market sell-off develop.

The March trend-line held on Tuesday, with a sizable reversal occurring in the NDX. This pointed to the possibility of the pullback ending, but that doesn’t appear to be the case anymore. A close below the Tuesday low will help really turn the picture bearish.

The first level of support to watch is the high from September 2 at 12439. Beneath there lies smaller levels, but given how extended the market had become in recent months, a broader downside target looks at risk here. The 200-day MA is rising up, currently at 11563.

Pulling back to the weekly log chart, we can see the top of the once decade-long bull market channel. This also aligns roughly with the 200-day MA. A decline to that point would be a sizable drop off the highs, but in the grand scheme of things it might turn out to be yet another moderate bull market pullback. We’ll have to wait to make further judgement on pullback versus something more damaging.

Nasdaq 100 Daily Chart (broke March trend-line)

Nasdaq 100 (Weekly Chart (top of bull market channel)

Nasdaq 100 Charts by TradingView

The S&P 500 is hanging on to the March trend-line, barely. I’ve admittedly been back-and-forth on the SPX this week and the unfolding of the Reverse Symmetrical Triangle (RST). The thing that has been firm is the importance of the long-term trend-line. With that, price is close to breaking it, and if it does, then the RST sequence discussed on Monday will be in play – decline off high, bounce, break the low of the first decline. This will have both the desired RST price sequence and March trend-line broken, the ideal scenario for would-be sellers.

On a break below 3805, the first level of meaningful support clocks in at 3694, but as is the case with the NDX a broader target is in mind. The rising 200-day is currently at 3442, but will be higher by the time price meets it. How much higher will depend on how quickly the market declines, if it does.

S&P 500 Daily Chart (RST pattern, tepid momentum)

S&P 500 Chart by TradingView

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—Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX