Interesting Triple Index Weekly Overhead Levels to Watch Closely

Jan 18, 2011: 12:54 PM CST

The US Equity Markets now face a critical test of weekly chart price levels that stretch back to mid-2008… or a surprising level on the NASDAQ weekly index.

You might be very surprised at the level the NASDAQ has reached if you focus most of your attention on the Dow or S&P 500.

Let’s take a look first at the similar index levels (structurally) on the Dow Jones and S&P 500 indexes… and then prepare to be surprised by the level the NASDAQ is challenging right now.

Just focusing on a quick take of the weekly chart structure, we see price nearing the 12,000 overhead target level.

The 12,000 level reflects a prior price swing high from the falling market made in early August 2008 – just before the ‘crash.’

Look closely to see 12,000 was also a pivot swing low (twice) also at the start of 2008.

It makes it the critical level to watch now.

There’s a good lesson to learn in weekly price charting and observing key levels here.  Traders were watching the 61.8% Fibonacci level at 11,250 which served as dual resistance in 2010.

An official price breakout through a key level often sets up a trade to play for the NEXT higher level, which in this case is right here at 12,000.  Markets don’t usually go ‘straight up’ from level to level, but in this case it did.

That’s what many technicians mean when they say “watch price” – a breakout from one price level often targets a move up (or down) to the next level as seen here.

A breakout above 12,000 soon – if the market does not pause/retrace here – then pushes the next target near 13,000 (May 2008’s swing high).

The picture is structurally almost identical in the S&P 500 Index:

The 61.8% Fibonacci Reference level (came into play twice as resistance in 2010) is 1,228/1,230.  Price broke that officially in early December, setting up the NEXT upside price target to 1,300 – the similar swing high from August 2008.

The high so far is roughly 5 points shy of that key level, which locks it in as the critical (yet simple) price index level to watch:  1,300.

This is nearly identical to 12,000 in the Dow Jones – with similar implications.

If the market does not pause/resist here (start heading lower soon), THEN the next intermediate term target rises to the 1,450 level.

While the Dow Jones and S&P 500 are structurally similar, the NASDAQ – technology favored – Index, is doing something quite different… and very significant.

If you look closely at the chart, the NASDAQ already faced key tests of resistance at the August and May 2008 price levels at the 2,600 level.

The index similarly broke that level in December, corresponding with a breakout in the SP500 and Dow, but the NASDAQ now faces a different – perhaps more significant – resistance level.

Would you be surprised to learn that the NASDAQ index is challenging its 2007 price high… as in THE high the market made ahead of ALL of the Bear Market of 2008?

If you don’t follow the NASDAQ index, you are probably surprised by this.

A key breakout above the 2,800 level (the actual index high is 2,861) leads the Index on to levels not seen since the end of 2000.

While both the S&P 500 and Dow Jones Indexes would be making new lifetime highs if the surpassed their respective October 2007 index highs, the NASDAQ (due to the “Tech Bubble” and Crash) would be returning to index highs seen previously at the conclusion of 2000.

That’s still about 40% down from its March 2000 ‘all time high’ peak just above 5,000.

Nevertheless, with the NASDAQ challenging the October 2007 high, the technology index has almost recovered all of its losses from the recent Recession and Bear Market – that’s a huge accomplishment.

So in summary, watch the following key overhead reference levels:

Dow Jones:  12,000
S&P 500:  1,300
NASDAQ: 2,800

It goes without saying that all three markets will be expected either to resist here at their key levels together, or break through them all together.

What happens thus changes the intermediate game in terms of positioning and strategies.

Should prove to be very interesting!

Corey Rosenbloom, CMT
Afraid to Trade.com

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7 Comments

7 Responses to “Interesting Triple Index Weekly Overhead Levels to Watch Closely”

  1. Quick Checkup of Current Market Breadth and Intraday Trendlines | Afraid to Trade.com Blog Says:

    […] Keep in mind the Higher Timeframe structural reference level at 1,300 – as I mentioned in today’s previous post on Weekly Levels to Watch. […]

  2. Alan Says:

    Thanks Corey, yes i think we're approaching a critical juncture. Interesting to note that the Nasdaq100 has already blasted through its 2007 high. False breakout, or leader to the upside? I think we'll know very soon.

  3. Corey Rosenbloom, CMT Says:

    Thanks Alan. I find I get so caught up in the intraday charts and SP500 levels that little surprises like this can be missed if we look at 5-min charts all day long! Generally, the NAS leads other market indexes (more-so the NAS 100) so indeed it will be interesting. It's rare to have markets poised so carefully all at respective key levels like this.

  4. Andrew Menaker, PhD Says:

    Nice analysis.

    Andrew Menaker, PhD

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    […] The SP500 pushed to a new recovery high Tuesday at 1,296 (shy of the key 1,300 number I described previously). […]

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    […] Pay close attention to this trendline – and of course pure prices in the stock market indexes as they challenge their daily moving averages and critical overhead resistance levels. […]

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