S&P 500, Nasdaq, Dow Forecast: Battle Lines Drawn as Trump Tariffs Hit

Equities Technical Forecast: Weekly Trade Levels

• Stocks remain constructive as Trump initiates tariffs on Canada, Mexico & China
• SPX500 snaps two-week rally- holding just below resistance at record high (6102/130)
• Nasdaq marks third weekly rally- trading mid-range below resistance at 22133
• Dow largest gainer with three-week rally now testing resistance at 44974

S&P 500 Price Chart – SPX500 Weekly

Chart Prepared by Michael Boutros, Sr. Technical Strategist; S&P 500 on TradingView

Technical Outlook: The S&P 500 pared a portion of the early-week sell-off but still snapped to a two-week winning streak on Friday with price now probing confluent resistance at 6102/30- a region defined by the objective 2024 yearly high and the 100% extension of the broader 2020 advance. Note that the 75% parallel of the ascending pitchfork we’ve been tracking for years is just higher and a breach / close above this slope will be needed to fuel the next major leg of the advance. Looking for possible inflection off this slope early in the month.

Initial support / medium-term bullish invalidation rests with the December low- a level that converges on both the median-line and channel support over the next few weeks. A break / close below this slope would suggest a more significant high is in place / a larger reversal is underway towards the 1.382% ext at 5651 and the 52-week moving average near 5546- both levels of interest for possible downside exhaustion / price inflection IF reached. Losses would need to be limited to the 38.2% retracement of the late 2023 advance at 5358 for the 2022 rally to remain viable.

A topside breach / close above this pivot zone exposes subsequent resistance objectives at the 200% extension at 6344 and the 2.236% extension at 6608. Note that a price parallel of the 2020 advance (pink) remains in focus here and suggests the potential for a slow grind higher in the weeks ahead.

Bottom line: The S&P 500 testing resistance at last year’s highs and we’re on the lookout for possible infection here into the February open. From at trading standpoint, losses should be limited to 5803 IF price is heading higher on this stretch with above the upper parallel needed to fuel the next major leg of the advance.

Nasdaq Price Chart – NDX Weekly

Chart Prepared by Michael Boutros, Sr. Technical Strategist; NDX on TradingView

Technical Outlook: Nasdaq has been trading into uptrend resistance since the start of the year at the median-line of the 2022 pitchfork. The 25% parallel has now been defended as support numerous times this month and keeps the broader uptrend in focus heading into February. 

Initial resistance strands with the 2024 high at 22133 and is backed closely by the 1.618% extension of the August rally at 22451 and the 1.618% ext of the 2022 advance at 22943- both areas of interest for possible price inflection IF reached.

Initial support rest along the 25% parallel (currently ~21000) and is backed by the 100% extension at 20433. Broader bullish invalidation now raised to the 52-week moving average, currently near 19524- note that this level converges on the 1.38% slope over the next few weeks and a break below would be needed to suggest a larger trend reversal is underway.

Bottom line: While momentum indicators suggest the immediate advance may be vulnerable here, the broader outlook remains constructive while within this formation. Form a trading standpoint, losses should be limited to 20433 IF price is heading higher on this stretch with a close above 2133 needed to fuel the next leg of the advance.

Dow Jones Price Chart – DJI Weekly

Chart Prepared by Michael Boutros, Sr. Technical Strategist; DJI on TradingView

Technical Outlook: The Dow marked a third consecutive weekly rally on Friday with DJI holding key resistance at the 2024 swing high / 1.618% extension of the August advance at 44974-45073. Yearly-open support rests at 42863 with a break / close below the 2023 channel line (red) needed to suggest a more significant high is in place / a larger correction is underway. Key support / bullish invalidation now raised to the 23.6% retracement / 52-week moving average at 40898-41198.

A topside breach / close above this pivot zone would threaten resumption of the broader uptrend with subsequent resistance eyed at the 100% extension of the 2020 advance at 47400 and the highlighted slope confluence near 49000.

Bottom line: The Dow responded to technical resistance this week at the record high with the broader outlook still constructive while within the 2023 channel. From a trading standpoint, losses should be limited to the yearly open IF price is heading higher on this stretch with a close above 44974 needed to fuel the next leg of the advance.  

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--- Written by Michael Boutros, Sr Technical Strategist with FOREX.com

Follow Michael on X @MBForex