What US stock indices are telling us.

May 8, 2014

Thurs 8th May (3 pm)

The three major US stock indices, S&P500, NASDAQ and Dow Jones Industrial Average, are all still consolidating in what can be described as bullish technical patterns. I will take a look at each of these.

S&P500: This major stock index is consolidating in an ascending triangle pattern. The daily chart shows the support trend line has been in play since Nov 2012. These patterns are bullish, more often than not, but there is a bit of a bearish ‘Quadruple Top’ look to this chart as well. Note the level for the 61.8% fib pull back here at the 1,577 region:

S&P500 daily chart:

S&Pdaily

S&P500 monthly chart: The monthly chart shows the significance of this 1,577 region more clearly.  Any such 61.8% fib pull back level to the 1,577 region would bring this index back down to test the previous highs prior to 2000 and 2007. Such a pull back to test the previous resistance level would be part of any healthy and continued bull move.

SPXmonthly

DJIA: much the same description applies here as for the S&P500: This stock index is also consolidating in an ascending triangle pattern. The daily chart shows the support trend line has been in play here since Nov 2012 as well and the chart also has a bit of a bearish ‘Quadruple Top’ look to it. Note the level for the 61.8% fib pull back here at the 14,000 region:

DJIA daily:

DJIA

DJIA monthly: As for the S&P500, the monthly chart of the DJIA shows the significance of this 14,000 region more clearly.  Any such 61.8% fib pull back level to the 14,000 region would bring this index back down to test the previous high prior to 2007. Such a pull back to test the previous resistance level would be part of any healthy and continued bull move.

INDUmonthly

NASDAQ: this chart of the technology weighted stock index is presenting a little differently. The NASDAQ is trading above the support of a daily trend line but has the look of either a bullish ‘Bull Flag’ or bearish ‘H&S’ pattern. Trend line breaks will be the best guide here too. The 4,000 seems to be a major support level.

NASDAQ

Summary: All three US stock indices are consolidating in potentially bullish technical patterns. Trend line breaks will be need to guide traders here about any breakout move, bullish or bearish.

There is a case to be made for a pull back as part of any continued overall bull market move. Daily support trend lines have been in play on all three indices since Nov 2012 and this is a long time for a sustained single move. The S&P500 and DJIA support fib pull back levels that would test previous and significant resistance levels.

The S&P500 and DJIA are both trading in ascending triangle patterns and both still have a bit of room to bounce along here before reaching the apex of these triangles. This means that we could be in for a bit more choppiness before there is any breakout movement here.