U.S. Indices Technical Highlights:
- S&P 500 may be ready to break out of its channel soon
- Nasdaq 100 beginning to trade outside of two-month channel
- FANMAG looks positioned to trade higher out of consolidation pattern
SPX, NDX trends remain well intact
The S&P 500 remains contained in the upward channel it has been building the past couple of months, but could be ready to leave its confines soon. At some point given the generally euphoric backdrop in the stock market, it seems we could get a final ‘hurrah’ rally before entering a corrective period.
But even if this outlook is wrong, using the channel in the near-term as a guide can offer traders a sound technical structure to lean on. Stay above the lower parallel and the outlook is at worst neutral, with the upside remining favored.
Break out of the pattern on the upside and price may accelerate. With the Nasdaq 100 (see below) already working on a breakout the same could be next for the SPX. A breakout from the channel could indicate a strong push is coming and momentum-style trading may be warranted.
On the flips-side, the bearish scenario would be if the lower parallel of the channel is broken. But it may not be a clear path lower given there is the March trend-line and good horizontal support around the 3640/60-mark.
All-in-all, continuing to use the robust channel pattern as a guide for shaping a trading bias.
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S&P 500 Daily Chart (could join NDX soon in breaking channel)
The Nasdaq 100 is in the process of clearing the upper parallel of the two-month-long grinding channel. This could pave the way for an accelerated move higher. What appears set to further bolster the NDX is the breakout occurring in the leading group of stocks known as FANMAG (FB, AMZN, NFLX, MSFT, AAPL, GOOG).
Not long ago there was a slight breakdown out of an extended triangle dating to September. But as these patterns often do, the first move will be a fake-out against the trend before resolving back in the direction of the primary trend.
The Jan 20 6%+ shot higher reversed the weak breakdown sequence, positioning the group of stocks to rally further from here. If FANMAG makes good on the triangle pattern then the NDX will have a strong tailwind to keep its rally going.
Nasdaq 100 Daily Chart (crossing top of channel)
FANMAG Daily Chart (triangle breakout)
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—Written by Paul Robinson, Market Analyst
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