S&P 500, Nasdaq, and Dow Jones push up on soft PPI

The S&P 500 tested a resistance area yesterday and held it, but with the issuance of a relatively low PPI report, buyers broke through that level.

Markets didn’t seem to react to yesterday’s news on higher-than-expected inflation expectations, but they are paying close attention to this morning’s announcement on lesser PPI, which doesn’t necessarily result in the same reaction. This accentuates sentiment as longer-term resistance in the Dow, S&P, and Nasdaq hovers overhead, keeping an eye on short-term success.

Yesterday, the Dow posted a nasty day bar, but sellers haven’t been able to trigger a significant drop there just yet. But as noted in this week’s technical prognosis, the Nasdaq has shifted in favor of additional strength.

The US stock market had a strong performance last week, with the Dow surpassing a long-term trendline and the S&P 500 and Nasdaq both breaking over collapsing wedge patterns. The goal of tracking dropping wedges is to look for bullish revisions, and the fact that price recently broke out from one of these formations retains the emphasis on short-term momentum with a big question mark about long-term direction.

In the S&P 500, the rebound move has been continuing on for a month at this point, while the previous run in June lasted slightly longer than two months. The index hasn’t really run into that long-term barrier at this moment, despite the fact that it’s just above and starts at approximately the 4100 area on the graph.

The S&P 500 is actually breaking out through short-term resistance and moving swiftly in the direction of the confluent zone of resistance lying atop after holding resistance at a Fibonacci level yesterday. The 200-day moving average, which reached its peak in August, is located around 4078. A longer-term Fibonacci mark is around 4099, and the negative trendline that has so far held the highs through 2022 trading is slightly above that level.

NASDAQ ENTERES GEAR

The Dow has been leading since the mid-October lows. That’s a little odd for new trends because the Nasdaq, which is heavily weighted in technology, typically is the leader when growth expectations start to be priced further into markets and the Dow is frequently the laggard.

Similarly, in a short squeezed condition, the Nasdaq is typically the most depressed and has higher potential since shorts swiftly cover. However, that didn’t actually occur last month. And up until that moment, the Dow had a higher low than the S&P and Nasdaq, suggesting that there may have been some actual amassing occurring as bulls protected the earlier October bottom. The S&P and Nasdaq both reached their annual low points on October 13th.

That started to change last week, particularly following the Thursday CPI report. At that point, the Nasdaq had a significant reaction as the tech-heavy index attempted to catch up. This, in our opinion, suggested a relatively brief as bears gave up after the Nasdaq’s strong breach from its descending wedge. And it emphasized short-term strength amid longer-term bearish potential, as we noted in this week’s tech outlook.

DOW JONES

Surprisingly, the Dow lagged slightly in the late-week run after CPI was reported while leading US indices on the way up in late-October. While the S&P and Nasdaq both rose, Friday was really a little red day for Dow futures as a doji formed.

Monday, the price maintained the Friday top and even created an inverted hammer on the graph, additionally indicating obstacles. And given how quickly and far the run began, that resistance might have developed into a peak.

However, after the announcement of the PPI report this morning, prices immediately moved back up to that level, exposing a zone of resistance above that may be of appeal to traders wanting to counteract this move in the stock market. The 34,000 level, which has held the highs on both Friday and Monday, is the area of resistance at the moment. Second zone is located directly above it, and it is plotted around the previous August top, or the 34,250 area.

The area near 33,444 is noteworthy for support because it was a jump that contributed to the Friday dip. If sellers can break through below where today, it will further suggest that resistance is moving through price action, which allows for a further bite down to the 33,000-33,100 region.

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Nasdaq 100

S&P 500

Fibonacci- Daily Pivots

Dow Jones Industrial Average