US equity indices refresh record highs; Further upside?
It was another all-time high (ATH) for the S&P 500, the Dow Jones Industrial Average and the Nasdaq 100 last week. The Nasdaq Composite Index, however, has yet to make the transition to unchartered territory, but it’s close. The latter, unlike the Nasdaq 100 which covers approximately 100 non-financial companies, covers a much broader range of companies (more than 3,000 stocks) that are listed on the Nasdaq Exchange.
Dip-Buyers Eyeing the S&P 500 This Week
While we do have signs of negative divergence on the monthly chart and overbought levels not seen since early 2020 on the weekly chart (according to the Relative Strength Index [RSI]), buyers continue to march on. It is worth observing that overbought (and oversold) conditions can remain stretched for prolonged periods, particularly in upward (and downward) facing markets.
Corrections on the daily chart have been ‘short and sweet’, movement allowing buyers to enter the market at better prices to take advantage of the trend. Assuming bulls remain in the driving seat—there is absolutely no obvious resistance overhead—a correction back to the 5,000 level this week may appeal to technical dip buyers. Not only is the trend complementing a rebound from 5,000, you will note that channel resistance-turned (potential)-support on the weekly chart could reinforce the barrier.
Nasdaq Composite Closing in on the ATH
In a recent post, the FP Markets Research Team highlighted that the Nasdaq Composite is testing the mettle of weekly channel resistance, extended from the high of 14,446. The release added that the channel resistance has nestled a whisker south of the all-time high at 16,212.
Recent research added the following and remains valid as we step into the final week of February (italics):
The channel resistance is unlikely sufficient to hamper bulls from eventually navigating to all-time highs, particularly with last week’s performance having reclaimed the prior week’s downside move. Consequently, a close above 16,212 could prove interesting for traders and investors. Some may simply press the (breakout) buy button following a close north of the level; others, more conservative traders, might sit on their hands and wait and see if price retests the breached level as support as a means of confirmation before pulling the trigger
