On Monday, US equity indices experienced an increase in response to US lawmakers’ reassurance that the nation will not default on its debt obligations. As a result, there is optimism regarding a potential agreement to raise the debt ceiling. Technical charts indicate a strong probability of continued index growth.
During the debt ceiling negotiations, US President Joe Biden expressed that all leaders of Congress have reached a unanimous decision to prevent a default. This announcement is reassuring given the low market expectations. It signals a positive outcome for avoiding a debt default.
The current quarter’s positive earnings, stabilization of US regional stock shares, and belief that the US Federal Reserve has completed its rate hikes are contributing to a positive sentiment in the market. Despite extreme bearish sentiment among global investment managers and low net purchases of single stocks by retail investors, the market remains underutilized. If negotiations regarding debt talks result in a favorable outcome, equities may experience a rise. Please refer to “S&P 500, Nasdaq Week Ahead: Resilience or a Lull Before the Storm?” published on May 15 for further discussion.
Dow Jones Industrial Average Daily Chart
Dow Jones Industrial Average: Rebounds from key support
The Dow Jones Industrial Average has experienced a rebound on its technical charts, specifically from the convergence of two strong support levels – the lower edge of a pitchfork channel from mid-2022 and the 200-day moving average. This successful hold above the support level presents an opportunity for further advancement. Although still in progress, a potential rise towards the horizontal trendline from August at approximately 34280 and a subsequent break above it could initiate a reverse head and shoulders pattern. The left shoulder represents the December low, the head signifies the March low, and the right shoulder could be identified as the May low. Upon formation and activation of this bullish pattern, there is potential for a move towards 37000 to occur.
S&P 500 Daily Chart
S&P 500: Gears up for an advance
The recent recovery of the S&P 500 index from its low point in April has led to speculation that a minor double bottom may have been formed, with the lows of both April and May being potential points of support. If the index were to surpass its February high of 4195, it would confirm a sustained seven-month uptrend and could potentially clear the way for reaching its August high of 4325. As previously noted in our publication “S&P 500 and Nasdaq 100 Index Technical Outlook: Turning Bullish” on January 28th, the overall trend of the S&P 500 index remains bullish.
Nasdaq 100 Daily Chart
On the downside, the end-April low of 4050 remains a key floor. Any break below the support would confirm that the immediate upward pressure had faded somewhat, pointing to an extended sideway range
Nasdaq 100: Surges toward the August high
The Nasdaq 100 index is currently in close proximity to its August high of 13720 points, as predicted in mid-April. This was indicated in the publication titled “Nasdaq 100 and S&P 500 to Retest August Highs – A Question of When Not If?”, which was released on April 14th.