Pulling Back the Perspective to the Weekly Reference Chart of SP500 Dow and NASDAQ

Jun 17, 2013: 12:59 PM CST

As we reach the halfway point of June 2013, let’s pull back the perspective on the “Big Three” US Equity Indexes (Dow Jones, SP500, and NASDAQ) to get a sense of the primary and intermediate trends along with the current reference levels for strategy and trade planning.

We’ll start with the SP500 ‘Bull Market’ chart from the March 2009 low to present:

From the bigger picture perspective, the strong bull market took price from the 666 low to the recent 1,687 high ahead of the recent ‘pullback’ or retracement against the dominant trend.

The Primary Trend (greater than 2 years) and the Intermediate Trend (6 months to 2 years) has remained bullish (uptrending) since the 2009 reversal low.

There have been two main counter-trend retracements (mid-2010 and mid-2011) both of which corresponded – coincidence perhaps – with the end of QE1 and QE2 stimulus programs.

All other retracements including the two events in 2012 have been relatively shallow events on the larger scale.

While that’s the backdrop or structure of the trend, we turn our attention now to the key inflection or reference levels for swing and even intraday planning with respect to the broader trends.

Again, the primary and intermediate trends continue to be “bullish” and we note the three shallow pullbacks or retracements to the rising 20 week Exponential Moving Average (EMA) in 2013.

The major question (for planning) is whether 1,600 will hold as support and thus the market will continue the strong uptrend and thus trade back to the all-time high and then above it beyond 1,700, or else whether sellers will turn prices lower particularly on a breakdown under 1,600 which sets up an expectation of a deeper retracement back to the rising 50 week EMA (at least) just above the 1,500 reference level.

For the moment, support held two times (a potential double bottom) and the recent bullish action suggests additional pro-trend continuity.  We’ll continue monitoring the price action relative to these higher frame levels including 1,600.

The Dow Jones shows a similar history and current reference levels for swing and position planning:

The immediate focal level for the Dow Jones is the round-number reference 15,000 index level though the rising 20 week EMA resides near 14,700.

For planning purposes, a breakdown under 14,700 strongly suggests that the index will continue the sell or liquidation swing (counter-trend retracement) toward the dual support confluence of the rising 50 week EMA and “round-number” reference at 14,000.

Otherwise, continued upside action suggests that the bullish pro-trend structure and environment will continue with bullish trades that develop along the pathway back to – and then above – 15,500.

The NASDAQ Weekly Chart:

Finally, we note the key reference levels in terms of a Trend Continuity (bullish short-term trading strategies) or else deeper retracement (hedging/bearish/cautious strategies) outcome.

For the NASDAQ the planning levels include the current “round number” reference of 3,400 along with the rising 20 week EMA (note how it held support two times in 2013) into 3,330.

A sharp breakdown under 3,330 suggests that price will continue a deeper retracement toward the 3,200 confluence.

Always take into account both bullish and bearish pathways and use price as a guide for supply/demand imbalance (what’s happening) at key reference levels.

Always ask whether price is moving away from a key level or toward a level and develop short-term trading strategies based on the price movement and low-risk opportunities that develop in the context of the broader perspective of the weekly chart.

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Corey Rosenbloom, CMT
Afraid to Trade.com

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Corey’s new book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).

2 Comments

2 Responses to “Pulling Back the Perspective to the Weekly Reference Chart of SP500 Dow and NASDAQ”

  1. Kathy Johns Says:

    This chart says it all. We cannot expect to have a stable figure that includes forex now that the economy is in its trying times. It is always a must to ask help from the experts regarding the trading sector.

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  2. gourav Says:

    Thanks for the your simple and clear analysis.