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    Dow, Nasdaq, S&P, and Russell for Summer 2022 - Technical Analysis

    Events transpiring around the world are growing nuttier, but Wall Street is having a summer party after a brutal plunge in major stock indices this year. It can be difficult to grasp which direction stock markets will run on any given day when bad news can be good news, automated platforms dominate trading volume and react to vocabulary and technical data without thinking, and human traders rarely accept the interrelated complexity of the world’s financial plumbing. The beauty of a price chart is that it’s the bottom line, indifferent to emotion, is often predictive when read accurately despite unforeseen news, and eliminates noisy “fund-a-mental-cases” and pundit prognosticators. I recommend a comparison of today’s charts with the most recent commentary and chart analyses in the “Dow, Nasdaq, S&P, and Russell for Spring 2022 – Technical Analysis” Part 1 and 2. Here is an excerpt from Part 2 in late May:

    “As WWIII knocks on the front door and inflation robs every household budget, a deep recession is taking shape right around the corner, credit market conditions are on the verge of collapse, interest payments on the national debt are unsustainable, the Fed’s REPO operation is hyperinflating to provide liquidity to unknown entities, Biden’s energy and domestic policies are a complete disaster, the global supply chain crisis is worsening, and the Fed’s commitment to tightening its monetary policy into a weak economy will expose the Emperors’ Taper Caper. In the meantime, the WEF is partying in Davos while tweaking their NWO Great Reset plan and couch potatoes are masking over monkeypox.” – TraderStef

    Monetary policy announcements and Fedspeak from the Federal Reserve that follow every FOMC meeting draw the undivided attention of humans and robots from all time zones. Financial gormandizers were particularly focused on last week’s announcement and subsequent presser with Jay Powell since weakness in the U.S. and global economy are signaling recession. A dovish hint from the Fed that interest rate hikes were coming to an end was anticipated.

    TraderStef Twitter on FOMC Dovish Hint Alert Jul. 27, 2022

    As expected, the Fed lifted rates by 75pbs to 2.25%-2.50%. The only major tweak to the FOMC statement vs. last month was its reassessment of the economy. It acknowledged that “recent indicators of spending and production have softened.” Dovish hints during the presser included sketchy forward guidance, no definitive policy for September, an emphasis on data dependence on a meeting-by-meeting basis, and Powell stated that interest rates are now “in the range of neutral.” Treasury yields declined across the curve with the 2-year yield dropping to 3%, the 30-year falling to 2.95%, the benchmark 10-year yielding 2.64% and testing its lowest level since mid-April, and the dollar ($DXY) closed lower at 105.82 on Friday.

    A lot can happen between now and early fall, but we’re at a place that’s neutral territory, and the Fed will likely pause if U.S. inflation peaks and trails off. Stocks and precious metals rallied on the potential for less aggressive interest rate hikes or a reversal (#TaperCaper) of policy because economic data is weakening.

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    Let’s go to the Dow, S&P 500, NASDAQ 100, and Russell 2000 charts and see what happened since the end of May. Keep in mind that when the Fed returns to quantitative easing mode, markets will rally until the global debt end game 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 Jul. 29, 2022 close…

    DOW Weekly Chart July 29, 2022 Close - Technical Analysis by TraderStef

     

    Excerpt from the Apr. 22, 2022 weekly chart analysis:

    “The charts are definitely having a bearish Plunger Candle (aka Shooting Star) party. During the week of Jan. 24, the Dow fell below the 50 Exponential Moving Average (EMA) and lower trendline of the Ascending Broadening Wedge. That event printed the first downside stairstep. The price pivoted to the upside in a classic Throwback pattern, and was followed by two Plungers that launched a waterfall and tapped the 23.6% Fibonacci (confluence with a Fibonacci Extension). That marked the second downside stairstep with a long-tail Dragonfly Doji. The Dragonfly did not close above the 50 EMA and resulted in two weeks of downside price action. The subsequent rally printed a Marubozu candle and solidified a lower trendline that’s drawn up from the Nov. 2020 election low. That rally did not last long, as the next three candlesticks were Dojis and included an Evening Doji Star at the high. That’s indicative of major indecision and led to another Plunger candle close with the Dow plummeting 916 points on Friday… Any lateral support that remained at the Tweezer Bottom from Jun. 2021, was wiped out with the sell-off to the second downside stairstep… The situation is precarious. One negative headline could quickly drive the price down to a third stairstep where large buy Volumes will provide some support from Mar. 2021 at the 23.6% Fibonacci Extension level around 31,422. The number three is very common in technical analysis and I must assume the chart is on its way to a third wave down. The chart is bearish and a scalping environment for professional traders.”

    Excerpt from the May 24, 2022 weekly chart analysis:

    “The Dow has lost about 17%. The official bear market measure is a 20% correction (29,562) but recent volatility is indicative of a bear as each rally morphs into a Dead Cat Bounce (aka a sucker’s rally). The Plunger candle on Apr. 22 did not lie. The subsequent price action never closed back above the 50 EMA and the lower trendline was taken to the woodshed during the last week of April and first week of May. The downward price trend followed through the second and third week of May and last week’s low printed a third stairstep down. That candle closed on the 23.6% Fibonacci Extension where support was found within a few candlesticks with decent buy Volume from Jan. and Feb. of 2021. The DMI-ADX remains in a negative trend and muted, the StochRSI is looking for a rally that could turn into dead cat bounce, and sell Volume increased with a falling price which is indicative of more weakness that may lead to another stairstep down. Support at the 38.2% Fibonacci retrace level is weak at 29,794. If last week’s low is violated with conviction in the near future, the price action will likely probe the official bear market target at 29,562. The chart is bearish and a scalping environment for professional traders.”

    The Dow has plunged 19.8% from its 36,953 high in Jan. 2022 to the 29,653 low in June and is just shy of 20%, which defines a bear market. The Dow closed at 32,845 on Friday. 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 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 DMI-ADX is in a potential transition to a bullish stance, the StochRSI is overbought but can still allow the price to rise further, and rising Volume with the rising price action is indicative of the strength of the trend. 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.

    $SPX S&P 500 Index weekly chart as of Jul. 29, 2022 close…

    SPX Weekly Chart July 29, 2022 Close - Technical Analysis by TraderStef

     

    Excerpt from the Apr. 22, 2022 weekly chart analysis:

    “The candlestick story is nearly identical to the Dow and not worth repeating. The DMI-ADX and StochRSi are more bearish than the Dow, the sell Volume characteristics are similar, and the 50 EMA was cleanly breached to the downside. Support levels below 4,060 are all nicely situated around the Fibonacci levels. I must assume the chart is on its way to a third wave down. The chart is bearish and a scalping environment for professional traders.”

    Excerpt from the May 24, 2022 weekly chart analysis:

    “The SPX has plunged 21%. It will officially meet the qualification of a bear market if 3,810 is breached with conviction. The price action that followed the Apr. 22 Plunger candle never closed back above the 50 EMA and briefly hesitated before slicing through lateral support at 4,060. The 3,810 low printed the third stairstep down and was a stone’s throw below the 38.2% Fibonacci confluence at 3,815. The SPX is also having a dead cat bounce party and the bear has a 3,720 lateral and the 23.6% Fibonacci Extension level in its sights. Candlestick support from Jan. and Feb. 2021 do not have a lot of buy Volume and adds to my suspicion that a fourth stairstep is likelyThe chart is bearish and a scalping environment for professional traders.”

    The SPX plunged 24.5% from its 4,819 high in Jan. 2022 to the 3,637 low in June, which placed the SPX in bear market territory and closed at 4,130 on Friday. The candlestick story, patterns, and studies are nearly identical to the Dow and not worth repeating. The Dead Cat Bounce off the Jun. 2022 low rolled over and completed a fourth stairstep down that briefly fell below the 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.

    $NDX Nasdaq 100 Index E-Mini Futures weekly as of Jul. 29, 2022…

    NASDAQ 100 E-Mini Futures Weekly Chart July 29, 2022 Close - Technical Analysis by TraderStef

     

    Excerpt from the Apr. 22, 2022 weekly chart analysis:

    Always trust your indicators and studies. Respecting them is better than getting whacked or playing with knives. 14,030 has been violated twice along with the 50 EMA. A third wave down is very likely. Support levels below the 38.2% Fibonacci are clearly marked on the chart. The chart is bearish and a scalping environment for professional traders.”

    Excerpt from the May 24, 2022 weekly chart analysis:

    “The NDX has plunged 31.5%. That meets the qualification for a bear market and a good reason to not play with falling knives. The technical set up is nearly identical to the SPX and not worth repeating. Current support at the 50% Fibonacci level is provided by a few candlesticks with solid buy Volume from Aug. through Nov. of 2020. Another stairstep down is likely if a dead cat bounce develops and support will surface at the 10,942 lateral and 61.8% Fibonacci retrace at 10,501. The chart is bearish and a scalping environment for professional traders.”

    The NDX has plunged 34% from its 16,767 high in Nov. 2021 to the 11,068 low in Jun. 2022 and closed at 12,971 on Friday. The candlestick story, patterns, and studies are nearly identical to the Dow and SPX and not worth repeating. The Dead Cat Bounce off the Jun. 2022 low rolled over and completed a fourth stairstep down that tapped the 10,942 lateral support. That last step wiped out all the gains since Aug./Sep. 2020. The pivot off the low has 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 would be the 23.6% Fibonacci level at 14,375. The chart is neutral and a scalping environment for professional traders.

    $RUT Russell 2000 Index E-Mini Futures weekly chart as of Jul. 29, 2022 close…

    Russell 2000 E-Mini Futures Weekly Chart July 29, 2022 Close - Technical Analysis by TraderStef

     

    Excerpt from the Apr. 22, 2022 weekly chart analysis:

    “There is nothing significant that can be added to the Jan. 21 commentary. If the 38.2% Fibonacci is breached to the downside with conviction, the price action could easily transition into a third wave down and tap the 50% Fibonacci level around 1,700 or so. The chart is bearish and a scalping environment for professional traders.”

    Excerpt from the May 24, 2022 weekly chart analysis:

    “RUT has plunged 31%. The technical set up is nearly identical to the NDX but the DMI-ADX has retained more momentum in its negative power trend. Last week’s low printed the third stairstep down at the 50% Fibonacci retrace level. Another stairstep down is likely if a dead cat bounce develops and support will surface at the 1,643 lateral and/or 61.8% Fibonacci retrace level. The chart is bearish and a scalping environment for professional traders.”

    The 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 Down Channel dominates the price action and completed a fourth stairstep down by tapping the 1,643 lateral. That last step wiped out all the gains since Nov. 2020. The price is trying to break above the Down Channel’s topside trendline and 38.2% Fibonacci level. If successful, the 50 EMA is the next bus stop at around 1,970. The DMI-ADX and StochRSI are identical to the Dow, SPX, and NDX. 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.

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    Dow, Nasdaq, S&P, and Russell for Summer 2022 - Technical Analysis

    Dow, Nasdaq, S&P, and Russell for Summer 2022 – Technical Analysis