Oct 4, 2022
VOT Research Desk
ANALYTICS and CONSIDERATIONS
Technical outlook for the S&P 500, Nasdaq100, and Dow Jones:
S&P 500 bouncing after removing the June low Bounce is all that is anticipated, but it could rise sharply before it ends
After overcoming the summer low, stocks are rebounding strongly, with the S&P 500,
Nasdaq100, and Dow Jones all having achieved their respective levels. In a bear market, rallies of this kind are to be expected, and the past 24 hours have seen a robust rally in futures.
While there was some stress and panicky price action in the bond and foreign exchange markets, stocks have not shown what I would call capitulation. Even though bearishness is high, there is little panic. The generally orderly decline suggests that equities have not yet entered a particularly challenging period.
The rally could continue for a short time or end today. Strong “out of the blue” surges that attract new buyers who believe the low is in and send shorts scrambling for cover are typical characteristics of bear market bounces.
There is initial resistance at 3640, but if that doesn’t hold, we might have to look higher, towards the trend line that runs down from the summer highs, possibly even as high as 3886, before the bounce stops working.
To get things moving lower again, a break below 3584 is required on the downside. Each rally will be viewed with a lot of skepticism if the decline continues to be orderly. However, if price action cascades with a significant VIX spike, a low that triggers a more long-term rally may soon occur.
It is not unusual for the Nasdaq100 to surpass the summer low on Friday prior to this rebound. Frequently, new lows are established only to be erased by a robust rally. The channel line off the summer high, which is closer to the 11650/700 area at this time, serves as support around 11492.
Prior to the outbreak of the pandemic, the Dow Jones not only wiped out the record high but also the summer low. It will attempt to restore both of those levels this morning, but it is unlikely to do so for an extended period of time. In the near future, look for 30149 as resistance, and on the downside, look for 28715 as support.
