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Key Technical Levels

Stock markets attempt to rally into the final week of August. Fed’s favorite inflation indicator, PCE, comes out this Thursday, and job numbers released on Friday may influence the financial markets. The core PCE numbers, job reports, and mid-September CPI report will become an increasingly important gauge of how the Fed may react in the late-September FOMC meeting.

After the cautious comments from Fed Chair Powell in his Jackson Hole speech last Friday regarding the Fed’s mission to fight inflation with further rate hikes, US stocks closed higher on Monday. As August winds down, SPX and COMPQ have fallen 3.5% and 4.5%, respectively.

On a positive note, market gains today snapped three straight weeks of losses in SPX and COMPQ. Popular indexes, including SPX, COMPQ, and NDX, rebound from one of the worst monthly performances since last December.

Is this a hopeful sign of another bottoming process?

Or will the recent oversold bounce reverse, triggering the next stock market downturn?

Although the recent stock market bounce may lead to a higher low and a higher high, popular stock markets continue to trade below their 50-day moving averages. Also, market breadth, as defined by advancing issues minus declining issues, remains neutral to negative. Sector rotations continue to be choppy and still lack the consistency of classic market bottoms.

Many popular market indexes face formidable resistances corresponding to the left and right shoulders of potential head and shoulders tops. The ability to break above the 50-day ma, the left/right shoulders, and the head can negate the 3-month distribution tops and signal the resumption of the Oct 2022/Mar 2023 primary uptrends. However, violation of neckline support warns of a market selloff of the magnitude of the height of the h/s top pattern.

Technical levels for SPX, INDU, NYA, COMPQ, NDX, MID, and SML are summarized below:

SPX (4,433.31)

Head = 4,607.07 (7/27/23 high) and neckline = 4,328.08 (6/26/23 low)/4,335.31 (8/18/23 low)

50-day ma = 4,459.71 and left/right shoulders = 4,448.47 (6/6/23 high)/4,458.48 (6/30/23 high) and 4,458.30 (8/24/23 high)

INDU (34,559.98)

Head = 35,679.13 (8/1/23 high) and neckline = 33,610.32/33,705.68

50-day ma = 34,666,74 and left/right shoulders = 34,588.68/34,467.35 and 34,694.68

NYA (15,879.59)

Head = 16,458.89 and neckline = 15,449.75/15,626.92

50-day ma = 15,962.26 and left/right shoulders = 15,904.20/14,932.01 and 15,894.31/15,911.81

COMPQ (13,705.13)

Head = 14,446.55 and neckline = 13,101.18/13,161.76

50-day ma = 13,812.05 and left/right shoulders = 13,864.06/13,844.50 and 13,834.69

NDX (15,052.46)

Head = 15,932.05 and neckline = 14,283.88/14,557.83

50-day ma = 15,211.36 and left/right shoulders = 15,284.55/15,275.18 and 15,279.24

MID (2,602.33)

Head = 2,743.01 and neckline = 2,512.94/2,554.96

50-day ma = 2,639.70 and left/right shoulders = 2,604.94/2,636.11 and 2,610.88/2,615.87

SML (1,206.80)

Head = 1,282.58 and neckline = 1,164.00/1,176.54

50-day ma = 1,228.55 and left/right shoulders = 1,223.81/1,225.18 and 1,213.01/1,214.26


Source: Chart courtesy of StockCharts.com

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