Before the Fed Rate Decision, US Indices Show Dow, S&P 500, Nasdaq Price Setups

Understanding Stock Market Trends

 

Signs of Fatigue in the Stock Market

 

Lately, there have been some signs that the stock market’s upward trend may be slowing down. This doesn’t necessarily mean that the trend is reversing, but it could be a temporary pause or consolidation.

 

Watching the Charts

 

When we look at the charts, we can see that the stock market index has moved below a certain line called the Ichimoku cloud cover. This is the first time it has happened since the rally started earlier this year. The rally has also stalled at this cloud cover. While this alone doesn’t mean the trend is reversing, it could be a sign that the upward pressure is fading.

 

Key Support and Resistance Levels

 

To confirm whether the upward trend is fading, we need to pay attention to some important levels. If the index breaks below the 200-period moving average and the June low of 4325, it could mean that the upward pressure has weakened. This could open the door for the index to go down further towards the 200-day moving average at around 4200. On the other hand, if the index manages to go above 4550, it would reduce the downside risks. There is also a stronger resistance level at the March 2022 high of 4637.

 

What About the Nasdaq 100 Index?

 

While the Nasdaq 100 index may have slowed down in its upward momentum, there is still a positive sign. The Moving Average Convergence Divergence (MACD) indicator on the weekly charts suggests that the uptrend is still intact. The MACD indicator is in positive territory, indicating that the interim trend is up. The only risk to the uptrend would be if the index breaks below the August low of 14560.

 

Looking at the Bigger Picture

 

When we zoom out and look at the bigger picture, we can see that the momentum on the monthly charts has been weak compared to the huge rally since late 2022. This raises the risk of a gradual weakening, similar to what we have seen in the gold market since May.

 

What About the DJIA?

 

The DJIA (Dow Jones Industrial Average) has experienced some gains, but they have stalled after a bullish break in July. This break confirmed that the downward pressure since 2022 has eased somewhat, but it doesn’t necessarily mean that the index has turned bullish completely. To have a more bullish outlook, the index needs to break above the early-2022 high of 36950. Until then, the index could remain in a broad range with a slight upward bias.