NASDAQ 100 and S&P 500 channels

At Tricio we use charts in order to look for insight into market sentiment and investor behaviour. We have been using the charts below since our company was founded. They are weekly semi-log charts with 13 and 50-week moving averages and provide a long-term picture of the NASDAQ 100 and S&P 500.

The chart below is the long-term view of the NASDAQ 100 from the 2009 lows. The blue lines show the dominant rising channel still in place. In our webinars we have described the NDX as being in the middle of the channel, which gives upside hope but also points out downside risk (bottom of the rising channel). There are ‘interior channels’ and trendlines on this chart as well, offering some potential resistance and support levels. At the moment, the big ‘outside week’ posted last week (higher high than the previous week, posting a new all-time high, followed by a lower low than the previous week) is worth noting as this is a warning sign of a potential bigger dip to follow. This could also be a ‘key reversal’ pattern of course, and point to a major reversal. These changes in sentiment and trend are great to describe in historical context (‘That was the place to sell….”) as the pattern could just be followed by some consolidation and then another push higher.

The shorter term chart of the NDX below shows that the 13-week moving average near 23,780 is worth watching on this pullback, then the 50-week moving average near 21,600. Trendline support from the blue channel line is near 17,100 while the top of the thick red line channel is near 20,300. Bulls will hope to see the 13-week moving average offer support (buyers are drawn in if approached) as investors may step up (demand) into the dip once again, with new highs then expected to follow.

The chart below shows the semi-log long-term S&P 500. We have highlighted the risks of this market being a bit toppy as the top of the rising channel was approached in previous publications. The outside week here could be a key reversal as well, but time will tell. 

The shorter-term view in the chart below shows potential support near 6,480 (13-week moving average) with the 50-week moving average near 6,000 potentially key below this. The rising purple line near 5,000 catches the eye of course, and could be a key area to watch in a major selloff. Bottom of the blue channel near 4,000? Worth pencilling in as big downside risk – but hopefully a tumble of this magnitude is not in the cards. 

Right now? High valuations in these markets and plenty of ‘leading with their chin’ AI hopes and expectations leave stock market investors vulnerable to bad news. Watch this pullback to see if buyers step up ‘where they should’. A sustained drop below the 13-week moving average would give some bear clues, as would a push below the 50-week moving average, with the focus then on rising channel and other support lines.

Gerry Celaya

Chief Strategist