3-month Accelerated Uptrend Channels?
Many major US indexes including S&P 500 Index (SPX), Dow Jones Industrial Average (INDU), and NASDAQ Composite Index (COMPQ) have accelerated uptrend channels since November 2020. These technical patterns are often bullish continuation formation. As a rule, a convincing surge above the top of the parallel uptrend channel line confirms a technical breakout and signals the start of the acceleration of the existing uptrend. However, violation of the bottom of the uptrend channel can also lead to a sharp correction or possibly a bear decline. The last time we witnessed so many uptrend channel formations were from October 2019 to February 2020. Unfortunately, the subsequent channel breakdowns led to the COVID-19 pandemic induced Feb-Mar 2020 bear market declines. In the coming weeks ahead, investors and traders need to monitor the marketplace closely for technical signs for the next directional trend. Enclosed below are the technical commentaries for the three popular US stock indexes:
S&P 500 Index (SPX – 3,916.38)
SPX retains its bullish Nov 2020 uptrend channel between 3,797-3,811 and 3,934-3,963. The height of the channel is 166-points. A convincing breakout above 3,811 renders a technical target of 4,048 (2/5/21 breakout target, near-term) and then to 4,129 (channel breakout target, medium-term). However, an outside day on 2/10/21 near the top of its uptrend channel coupled with an inside day on 2/11/21 warns of another short-term consolidation. The key initial support is 3,797-3,811 or the bottom of its Nov 2020 uptrend channel (3,797). Violation of the bottom of the uptrend channel and violation of the 50-day ma at 3,764 warns of a deeper correction toward 3,631-3,694 (1/29/21 low, 38.2% retracement from Oct 2020 to Feb 2021 rally, and channel breakdown target).
Dow Jones Industrial Average (INDU – 31,430.70)
INDU retains its bullish Nov 2020 uptrend channel between 30,492-30,648 and 31,808-31,945. The height of the channel is 1,453 points. There is the potential for an accelerated channel breakout above 31,808-31,945 and an INDU target of 32,688 (recent 2/8/21 breakout target) and then 33,398, medium-term. Initial trading support is 31,224-31,272 (2/8/21 breakout), and below this to 30,492-30,648 (bottom of the Nov 2020 uptrend channel and 50-day ma), 29,856.30 (1/29/21 low), and then to 29,039 (channel breakdown target).
Nasdaq Composite Index (COMPQ – 14,025.77)
The bullish Nov 2020 uptrend channel between 13,258-13,368 and 14,081-14,182 bodes well for an accelerated channel breakout. Above 14,081-14,182 suggests +924 rendering the next rally to 14,473 (2/4/21 breakout target), and then 15,106 (channel breakout target). The recent inside day (2/10/21) and inside day (2/11/21) may suggest a near-term consolidation toward trading support at 13,729 (2/4/21 breakout), and below this to 13,431.5-13,536 (2/2/21 gap-up), and then 13,258-13,368 (bottom of the channel). Violation of 13,431.5 warns of a deeper correction to 12,985-13,048 (1/29/21 low and 50-day ma) and then to 12,334-12,543 (channel breakdown target and 12/21/20 and 1/4/21 lows).