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Simple bounce or change of trend? Dow Jones, S&P 500 and Nasdaq 100 under review


We live exceptional moments in the world stock markets. So much so that in a very short space of time we have gone from the fastest 'bear market' in the history of the Dow Jones to a new theorist ‘bull market’.

Technical analysis

The Dow Jones accumulates a rebound close to 30% from the lows of March and the S&P 500, the main index of the world, of 25%. And on the other side of the Atlantic it is said that when the indices bounce above 20% from lows it is because we are at the start of a ‘bull market’. In my opinion this is rather anecdotal than anything else, but it can never be ignored. Well, the statistics of the different events that have been happening throughout history on Wall Street have a firm base on which they are supported and generally work quite well. Of course they can fail, because there is nothing infallible in the markets, but the degree of success is high. The problem is that we continue without a return figure of any kind and experience has shown us in previous crises that the normal thing is that we attend a relapse towards the minimums. And that's where we have the key.

If these hold, leaving the door open to possible price expansions from which to build potential bullish divergences, it is likely that we will have market ground there. But if they are drilled clearly, we are on the verge of a new serious bearish lash. The only thing that somehow makes me doubt the possibility of going back to the lows is that there are many analysts who expect this relapse, and we already know that by the Theory of the contrary opinion, the market is specialized in doing the opposite of what that the vast majority think. For now and as a snack we will see if the S&P 500 is able to clearly recover the MM200 weekly.

Below, we review the technical aspect of the three major US indices:

Dow Jones

There is still a lot of fabric to cut before being able to claim victory despite the important rebounds of recent days. More than anything because experience tells us that we are witnessing a simple rebound (reaction phase) after a previous full-blown crash. In fact, we do not have any return figure today and, normally, we will most likely attend a relapse towards the annual minimum area later. There we will see if the prices make ground or are drilled minimally to build some kind of bullish divergence or on the contrary they pulverize without contemplation. We do not know. Nobody knows. We talk about what historically, in terms of probability, usually happens. However, I recognize that I really like the level the index is bouncing from, from the 50% adjustment / retracement of the entire rise in the last big bullish cycle, from approximately 18,000 points. If this support were drilled the next we have it at 15,000 points (61.8%). But we cannot ignore the fact that, in this crisis, new to everyone, things happen too quickly for good and for bad. And since everyone talks about a decline towards lows, one already begins to doubt. You know, the theory of contrary opinion usually works very well.

Dow Jones Monthly Chart

S&P 500

If you are a regular reader of our page, you will know that a server is a clear believer in the MM200 weekly as a support / resistance zone in long-term terms, depending on the market moment in which we find ourselves. Not so, not at all, of the daily MM200 that generates false signals both upward and downward and that, with specific exceptions, generates a lot of noise and is very ineffective. In the present case, the weekly MM200 in the S&P 500 has been acting as a support, with maximum precision, since 2011 and it has been in this crisis due to the coronavirus when it has been clearly drilled. And the million dollar question is whether we are facing a simple ‘pull back’ to the new resistance zone (formerly support) to take a run to the downside or on the contrary we are facing something more than a simple rebound. In fact, beyond the weekly moving average with which the US index is flirting, we have another important area of ​​resistance in the last weekly bearish gap he is facing, at 2,711 points. Closing or, what is the same, closing this ‘gap’ would undoubtedly be a sign of strength to which we cannot turn a deaf ear.

S&P 500 weekly chart


Technology is undoubtedly the sector that continues to show the most strength. And within it the companies that make up the so-called FANG. You only have to look at the weekly chart of the index to realize the impeccable long-term rising minimums and maximums that the index continues to shape. Not to mention the weekly MM200, which continues to act as a support. Technology remains bullish in long term terms.

Nasdaq 100 weekly chart

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