Dow, Nasdaq, S&P, and Russell for Winter 2023 – Technical Analysis

Dow, Nasdaq, S&P, and Russell for Winter 2023 – Technical Analysis

Originally published Dec. 29, 2022 by TraderStef on CrushTheStreet

The U.S. stock market indices are under pressure for a variety of reasons. There’s the Federal Reserve’s FOMC monetary policy meeting that delivered an expected 0.50% increase in the Fed Funds Rate with a hawkish tone from Jay Powell, a proxy war (Twitter thread) in Ukraine between NATO and Russia that’s escalating with no sign of a ceasefire, the U.S. housing market is on the cusp of a decisive plunge, layoffs are accelerating across the board, nearly all economic indicators are signaling a hard-landing recession on the horizon, and the latest COVID-19 outbreak of a mutant from China (thread) is globe-trotting (latest intel). There’s no Goldilocks factor to be found in the current state of affairs. Below is a selection of choice articles in chronological order since the late fall analyses on Nov. 21, a few charts, an important audio interview on the Ukraine situation, today’s technical analysis on the U.S. stock indices, and two recent interviews that offer a peek at 2023.

David Collum Twitter - Old Enough to Remember Markets Dec. 2, 2022
  • The Global Gas Crunch Is Set To Worsen As China Reopens – OilPrice.com
  • Vegetable Prices +38% In November, Inflation Under Control? – Washington Standard
  • Central banks expected to call early end to rate tightening – Oxford Economics
  • The big story on the market downturn: The wealth bubble is popping – The Hill
  • Retail Sales, Manufacturing Declines Point to Slowing Economy – WSJ
  • Markets don’t believe Jay Powell – Financial Times
  • Prepare for housing slump, unemployment spike, recession to set in – Kenneth Rogoff
  • Manufacturing PMIs Scream Recession in December Flash Report – S&P Global
S&P Global Flash US PMI Composite Output Index
  • ‘The Fed is going to overdo it’: 2023 rate outlook and weak data – MarketWatch
  • Morgan Stanley: US Corporate Profit Drop Could Rival 2008 Era – Bloomberg
  • Rising interest rates shake markets, dangers grow in shadow banking – WAPO
  • Japan Sparks Market Chaos With Huge ‘Yield Curve Control’ Adjustment – ZH
  • Spike In Fed Discount Window Usage Hints at Looming Bank Crisis – ZH
  • Gold at $4,000? Analysts share their 2023 outlook for prices – CNBC
  • Elon Musk: Rapid Rate Hikes Cause Enormous Damage to Econ – The Street
  • Japan Exit From Yield Curve Control More Urgent With Inflation Spike – El-Rian
Japan Inflation Chart Dec. 23, 2022
  • Russia Issues Ultimatum to Kyiv: Accept The Terms Or Else – WarNews24/7
  • Ukraine & WW3? w/Ret. Col. Douglas Macgregor – Savage Nation (Audio)
  • ‘Heartless’ mass layoffs hit US workers ahead of holidays – The Guardian
  • Continuing Jobless Claims Near 11-Month Highs – ZH
  • Crowne Plaza Times Square Hotel owners file for bankruptcy – The Real Deal
  • US Pending Home Sales Fall to Second-Lowest Level on Record – Bloomberg
  • Existing home sales have collapsed – Markets & Mahem
Existing Home Sales as of Nov. 30, 2022

Let’s go to the DowS&P 500Nasdaq 100, and Russell 2000 charts and see what happened since mid-November. Keep in mind that when the Fed returns to quantitative easing mode, markets will rally until the global debt endgame plays out. To view a larger version of any chart below, right-click on it and choose the “view image” option.

$DJI Dow Jones Industrial Index weekly chart as of Dec. 29, 2022, 4pm ET…

Dow Weekly Chart Dec. 29, 2022 4pm ET - Technical Analysis by TraderStef

Excerpt from the July 31, 2022 weekly chart analysis:

“The rally in May was another Dead Cat Bounce that rolled over and completed a fourth stairstep down to the 38.2% Fibonacci level. That last step wiped out all the gains since Nov. 2020. The Descending Broadening Wedge drawn down from Jan. 2022 has a bullish Falling Wedge within it, and its topside trendline was taken out decisively over the last two weeks. The price action is approaching the overhead 50 Exponential Moving Average (EMA) that’s just above a Fibonacci Confluence and could rally to the topside trendline of the Descending Broadening Wedge if buy Volume continues to rise or remains steady. The strong pivot off the low is bullish, but caution is warranted until the 50 EMA and topside trendline of the Descending Broadening Wedge are taken out decisively. The chart is neutral and a scalping environment for professional traders.”

Excerpt from the Nov. 21, 2022 weekly chart analysis:

“The Dow plunged 22.5% from its 36,953 high in Jan. 2022 to a 28,661 low in Oct. 2022. Last week’s price action printed a high of 33,987 and closed at 33,746 on a Spinning Top candlestick that’s indicative of indecision… The subsequent correction from mid-August to the October low completed a fifth stairstep down… and found support from August through November of 2020 and pivoted off a Double Bottom (see detail on a daily chart). The current rally closed above the Descending Broadening Wedge’s topside trendline after taking out the 50 EMA and Fibonacci confluence two weeks ago… The next resistance level is the mid-August Shooting Star (aka Plunger Candle) with a 34,281 high. The rally was strong, but caution is warranted. The Fed’s December FOMC meeting is slated to announce a 0.50 basis point hike in the Federal Funds Rate (FFR) on Dec. 14 and release its bi-monthly summary of economic projections. The chart is neutral and a scalping environment for professional traders.”

The Dow’s price action tapped 34,596 one week after the previous analysis, then rolled over for two weeks. The next candlestick has a long wick that printed a higher high at 34,712, but ended the week with a bearish Plunger Candle following the Jay Powell’s fedspeak during his FOMC monetary policy announcement. Support was found at the 50 EMA, the Descending Broadening Wedge’s topside trendline, and the 23.6% Fibonacci at a 32,573 low. Tomorrow is the last trading day of the week and for 2022. This week’s candlestick will remain in indecisive Doji land (aka Rickshaw Man) unless tomorrow’s price action transforms the candle to a bullish or bearish signal.

The DMI-ADX is transitioning and may trend bearish, the StochRSI was overbought and threatens to rollover into bearish territory, and buy Volume trended downward into the rally off a Double Bottom and is indicative of more downside or consolidation. If the price action remains the 50 EMA and consolidates, a rally might resume, but seasonality and economic indicators suggest downside into early 2023 that could probe the October lows. The chart is neutral and a scalping environment for professional traders.

$SPX S&P 500 Index weekly chart as of Dec. 29, 2022, 4pm ET…

S&P 500 Weekly Chart Dec. 29, 2022 4pm ET - Technical Analysis by TraderStef

Excerpt from the July 31, 2022 weekly chart analysis:

“The Dead Cat Bounce off the Jun. 2022 low rolled over and completed a fourth stairstep down that briefly fell below 3,720 lateral support. That last step wiped out all the gains since late Dec. 2020. The price action is approaching the overhead 50 EMA that’s resting on a Fibonacci Confluence. Caution is warranted until the 50 EMA and topside trendline of the Descending Broadening Wedge are taken out decisively. The chart is neutral and a scalping environment for professional traders.”

Excerpt from the Nov. 21, 2022 weekly chart analysis:

“The SPX has plunged 27.5% from its 4,819 high in Jan. 2022 to the 3,492 low in October. Last week printed a high of 4,029 and closed at 3,965 on a Spinning Top candlestick that’s indicative of indecision… The subsequent low of 3,492 in October completed a fifth stairstep down to lateral support from August through November of 2020 and pivoted off the 50% Fibonacci level. The rally since mid-October failed to take out the overhead 50 EMA while printing a Spinning Top candlestick last week… Resistance stands at the 50 EMA, the Descending Broadening Wedge’s topside trendline, and 23.6% Fibonacci level that’s just shy of 4,200. The rally was strong, but caution is warrantedThe chart is neutral and a scalping environment for professional traders.”

The SPX tapped 4,101 one week after the previous analysis, then stalled at the overhead 50 EMA and Descending Broadening Wedge’s topside trendline. The subsequent Plunger Candle has a long wick that printed another 4,101 high, and its low bottomed at 3,828 following Jay Powell’s fedspeak during his FOMC monetary policy announcement. Last week’s Doji candle closed just above the 38.2% Fibonacci level after spiking to its 3,764 low. So far, this week’s low is 3,781 within another indecisive Doji unless tomorrow’s price action transforms the candlestick.

The DMI-ADX is threatening to transition into a bearish Alligator Tongue power trend, the StochRSI was overbought and might rollover into bearish territory, and buy Volume trended downward into the rally off a Double Bottom that’s indicative of near-term downside or consolidation. If the price action remains above the 38.2% Fibonacci level and consolidates, a rally might resume, but seasonality and economic indicators favor more downside in early 2023 that could probe the October low. The chart is neutral and a scalping environment for professional traders.

$NDX Nasdaq 100 E-Mini Futures weekly chart as of Dec. 29, 2022, 4pm ET…

Nasdaq 100 Futures Weekly Chart Dec. 29, 2022 4pm ET - Technical Analysis by TraderStef

Excerpt from the July 31, 2022 weekly chart analysis:

“The Dead Cat Bounce off the May 2022 low rolled over and completed a fourth stairstep down and wiped out all the gains since Aug./Sep. 2020. The pivot off the low stalled at the 38.2% Fibonacci level. Volume is steady but not trending upwards with the price. Caution is warranted until the 50 EMA and topside trendline of the Descending Broadening Wedge are taken out decisively. The next resistance level is the 23.6% Fibonacci. The chart is neutral and a scalping environment for professional traders.”

Excerpt from the Nov. 21, 2022 weekly chart analysis:

“The NDX has plunged 37.5% from its 16,767 high in Nov. 2021 to the 10,485 low in Oct. 2022. Last week’s price action printed a high of 12,119 and closed at 11,708 on a Spinning Top candlestick that’s indicative of indecision… The low in October completed a fifth stairstep down to lateral support from July 2020 and pivoted off the 61.8% Fibonacci level. The pivot has formed a bearish Ascending Broadening Wedge and the current rally has not yet reached the 50 EMA or topside trendline of the Descending Broadening Wedge. The chart is neutral and a scalping environment for professional traders.”

The technology weighted NDX Futures is more bearish than the Dow and SPX. A brief rally after the November analysis printed a high of 12,339 and faded into a bearish Plunger Candle going into the FOMC announcement. Resistance was firm at the Descending Broadening Wedge’s topside trendline and the price action never challenged the overhead 50 EMA. Last week printed a 10,870 low, and this week’s indecisive Doji has a 10,759 low. If tomorrow doesn’t transform the Doji into a bullish candlestick, a breach below the Ascending Broadening Wedge’s lower trendline is likely to probe support at the 61.8% Fibonacci level.

The DMI-ADX remains in a negative trend but indecisive, the StochRSI was overbought and might rollover into deeper bearish territory, buy Volume faded during the recent rally, and sell Volume increased which is indicative of more downside in the near-term. The chart is bearish and a scalping environment for professional traders.

$RUT Russell 2000 E-Mini Futures weekly chart as of Dec. 29, 2022, 4pm ET…

Russell 2000 Futures Weekly Chart Dec. 29, 2022 4pm ET - Technical Analysis by TraderStef

Excerpt from the July 31, 2022 weekly chart analysis:

“RUT has plunged 34% from its 2,461 high in Nov. 2021 to the 1,641 low in Jun. 2022 and closed at 1,885 on Friday… a third stairstep down tapped 1,643. That last step wiped out all the gains since Nov. 2020. The price is trying to break above the topside trendline and 38.2% Fibonacci level. If successful, the 50 EMA is the next bus stop at around 1,970… The buy Volume is steady but trended downward last week. Caution is warranted until the 50 EMA is taken out decisively. The chart is neutral and a scalping environment for professional traders.”

 Excerpt from the Nov. 21, 2022 weekly chart analysis:

 “RUT has not printed a lower low since mid-June and completed an Adam & Eve Double Bottom at the October low. The subsequent rally was halted over the last two weeks at the overhead 50 EMA resistance and 38.2% Fibonacci level. Caution is warranted until the 50 EMA is taken out decisively. The chart is neutral and a scalping environment for professional traders.

RUT could not break above the 50 EMA for six long weeks that ended with a Plunger Candle following the FOMC announcement. The most recent high printed in mid-November at 1,913, and this week’s Doji low at 1,731 matched last week’s Doji low of 1,730. Further downside price action could probe the 50% Fibonacci level or 1,640 support at the Adam & Eve Double Bottom.

The DMI-ADX is in a negative trend but indecisive, the StochRSI was overbought and might rollover into deeper bearish territory, buy Volume faded during the most recent rally, and sell Volume increased which is indicative of more downside in the near-term. The chart is bearish and a scalping environment for professional traders.

Nancy Tengler: ‘Treacherous Waters’ Ahead for Investors – Fox Business, Dec. 20

Robert Kiyosaki w/Jim Rickards: Economic Disasters in 2023, Part 1 of 4 – Dec. 28

Plan Your Trade, Trade Your Plan

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