Dow Jones & Nasdaq 100 Value Outlook:
Dow Jones & Nasdaq 100 Forecasts for the Week Ahead
Rising yields continue to pressure equity markets but the Dow Jones remains within reach of record levels, even as the Nasdaq 100 slips beneath its February lows. Since the Nasdaq’s peak on February 12, the tech-heavy index is down roughly 7.6% whereas the S&P 500 is down 2.5% and the Dow Jones is flat. The diverging performances highlight the ongoing reflation trade.
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With little to suggest the rise in yields will suddenly halt, maintaining price above key support on the Dow will be necessary for the technical landscape in the days ahead. Should price fall beneath the key barrier, losses could accelerate just as they did with the Nasdaq which may give method to a broader selloff in US equities.
Dow Jones Value Chart: Day by day Time Frame (February 2020 – March 2021)
To that end, the Dow Jones will look to the rising trendline from January 2018 which bounces off the high in February 2020 adopted by a nearby Fibbonaci level, the 50 day moving average and a rising pattern line from March 2020.
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Weekly Stock Market Outlook
Together the technical levels should continue to provide considerable help to the industrial average as it looks to avoid a deeper retracement. A break beneath the March trendline might lead to further losses as it would represent a serious technical break. The zone resides from 31,130 to approximately 30,800.
Nasdaq 100 Price Outlook
The Nasdaq 100 on the other hand, continues to bleed decrease. Selling stress Wednesday saw the index slip beneath its February low around 12,725 which will remain a technical level of observe going forward. That said, continued tests of the zone and a new lower-low might suggest the Nasdaq 100 is vulnerable to deeper declines. Secondary support may reside around the index’s September high close to 12,465.
Nasdaq 100 Value Chart: 4 – Hour Time Frame (October 2020 – March 2021)
If bulls make a stand and the Nasdaq reverses higher, initial resistance might exist just shy of the 13,000 mark with subsequent barriers along the series of recent swing highs near 13,315. The zone also coincides with the ascending trendline from March. Shorter-term pullbacks may improve risk-reward profiles for bearish exposure.
Traders can look to approach a technically weakened Nasdaq and a stronger Dow Jones through bullish exposure to the Dow Jones and simultaneous bearish exposure to the Nasdaq 100. Such positioning would be properly suited if the rotation trend continues but isn’t without considerable risk. Further still, the odds of profit and loss are evenly balanced in trading. In the meantime, follow @PeterHanksFX on Twitter for updates and analysis.
–Written by Peter Hanks, Strategist for DailyFX.com
Contact and comply with Peter on Twitter @PeterHanksFX