S&P 500, Nasdaq, Dow Forecast for the Week Ahead

Equity Indices Technical Forecast: Weekly Trade Levels

• U.S. equity plunge to fresh monthly lows but find solace into the close of the week as expectations for a December rate cut rebound
• S&P 500 drops more than 6% off record high- break of monthly opening-range threatens deeper correction
• Nasdaq marks third consecutive weekly loss with price testing confluent uptrend support
• Dow reversal breaks July uptrend- tumbles nearly 5.6% off record high, support in view

Review my latest Weekly Strategy Webinar for an in-depth breakdown of these equity indices and more. Join live on Monday’s at 8:30am EST.

S&P 500 Price Chart – SPX500 Weekly

Chart Prepared by Michael Boutros, Sr. Technical Strategist; S&P 500 on TradingView

Technical Outlook: In my last S&P 500 Forecast we noted that, “the S&P 500 has carved the November opening range just above channel support and the focus is on a breakout in the days ahead to offer guidance. From a trading standpoint, losses would need to be limited to this week’s low IF price is heading higher on this stretch..” The index broke lower last week with the decline slipping below confluent support at the October low-week close (LWC) at 6669. The sell-off marks a break of the monthly opening-range, and the threat remains for further losses while below this threshold.

S&P 500 Price Chart – SPX500 Daily

Chart Prepared by Michael Boutros, Sr. Technical Strategist; S&P 500 on TradingView

A closer look at the S&P 500 daily chart shows the index breaking below support on Monday with a re-test of channel support as resistance marking and outside-day reversal on Thursday. Support now rests with the October low at 6530 and is backed by 6412/26- a region defined by the 1.618% extension of the October decline and the 23.6% retracement of the yearly range. Look for a larger reaction there IF reached with a break / close below needed to suggest a more significant correction is underway. Subsequent objectives eyed at the July high-day close (HDC) / August open at 6432 and the August low at 6214.

Initial resistance is now eyed at the October low-day close (LDC) at 6669 and is backed by the 61.8% retracement at 6768. A breach / close above this threshold would suggest a more significant low in place with subsequent objectives seen at the monthly open at 6845 and 6912/83- a region defined by the 2.618% extension of the April advance and the 1.618% extension of the yearly range. Strength beyond this threshold would be needed to mark resumption of the broader uptrend.

Bottom line: The S&P 500 has broken the October opening-range lows and a multi-month uptrend. From a trading standpoint, rallies should be limited to 6768 IF price the index is heading for a deeper correction on this stretch with a close below 6530 needed to fuel the next leg towards 6412/26 (area of interest for possible downside exhaustion / price inflection IF reached).

 

Nasdaq Price Chart – NDX Weekly

Chart Prepared by Michael Boutros, Sr. Technical Strategist; NDX on TradingView

Technical Outlook: On November 15 we noted that, “Nasdaq is trading just above multi-month channel support with the immediate focus on a breakout of this week’s range for guidance. Ultimately, losses would need to be limited to 23,712 for the yearly uptrend to remain viable..” The index broke below the previous week’s range on Monday with NDX falling more than 8.7% off the yearly highs to register an intraweek low at 23,854 before rebounding. It’s decision time for the bulls.

The immediate focus is on possible inflection off near-term support at the August HWC and the 23.6% retracement of the yearly range at 23,712/907. A break below this pivot zone would threaten a deeper correction within the yearly uptrend with subsequent support seen at 23,000 and the 22,133/500- a region defined by the 2024 swing high, the 52-week moving average, and the 38.2% retracement. Note that the median-line converges on this threshold into the close of the year and losses below this slope would suggest a more significant trend reversal is underway (area of interest for possible downside exhaustion IF reached).

Resistance is eyed at the 61.8% retracement of the decline off the record highs at 25,293- a breach / close above this level would be needed to suggest a near-term low is in place with subsequent objectives eyed at the monthly open at 26,114 and the 1.618% extension of the broader 2020 advance at 26,609.

Bottom line: Nasdaq broke below the June uptrend last week with the decline rebounding off confluent support on Friday and traders are looking for a larger inflection off this support zone for guidance. From a trading standpoint, rallies would need to be limited to 25,293 IF price is heading lower on this stretch with a close below 23,712 needed to fuel the next leg of the correction.

Dow Jones Price Chart – DJI Weekly

Chart Prepared by Michael Boutros, Sr. Technical Strategist; DJI on TradingView

Technical Outlook: The Dow reversed off confluent uptrend resistance earlier this month with the index breaking below the July channel last week and the decline now risks a deeper pullback within the multi-year uptrend.

Confluent support now rests at the 2024 swing high and the October low at 45,071/470. Note that the median-line converges on this threshold over the next few weeks. Look for a larger reaction there IF reached with a break / close below suggesting a more significant reversal is underway towards the next major technical consideration at 43,428/916- a region defined by the February reversal close and the 38.2% retracement of the yearly range.

Resistance now stands with the 61.8% retracement of the decline off the all-time high at 47,399 and is backed by the 1.382% retracement of the yearly breakout at 48,279. A breach / close above this threshold is needed to mark resumption of the broader uptrend with subsequent resistance objectives eyed at 50,000 and the 1.618% extension at 50,272.

Bottom line: A break of the monthly opening range is now approaching confluent uptrend support, and the focus is on a potential exhaustion low in the days ahead. From a trading standpoint the risk is lower while below 47,399 – look for a larger reaction off 45,071/470 IF reached for guidance here.

Federal Reserve Interest Rate Expectations

Source: FedWatch Tool, CME

Keep in mind market expectations for a December rate hike have now climbed back above 70% (up from sub-30%) after New York Federal Reserve President John Willams noted that there was still room for further easing next month without threatening the central bank’s 2% inflation target. Note that the release of the November Non-Farm Payrolls and CPI reports have been delayed on account of the government shutdown until after the next FOMC policy meeting. Fed Fund Futures have been extremely volatile over the past week as traders try to anticipate whether there is enough justification for the Fed to cut ahead of these key data points- stay nimble here and expected continued volatility next week.

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--- Written by Michael Boutros, Senior Technical Strategist

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