Back to Blog

US stock markets unable to beat multi-year trendline resistance

Jason Sen
The E-mini Dow Jones has been in a very strong bull trend since 2009 as well you know. In fact, since Trump won the US election in November, the market has rallied from a low of 17,418 up to 22,132. This makes an impressive gain of 4714 points or 27% for investors in just nine months.
In the monthly chart below you can see how the six-year trendline resistance is causing problems for bulls in such an overbought market.
Click to expand image
One can certainly argue that we are overdue a correction, with only one month of small losses over that ten-month period.
If we zoom into the weekly chart below, there are a couple of minor negative candles. The market peaks at 22,132 in the second week of August, but closed that week lower. In fact it was over 150 points lower to leave a reversal candle.
Click to expand image
In the following week the recovery only reached 22,067, unable to test that all-time high from the previous week at 22,132. Again the market closed over 150 points lower to leave a second negative candle. These minor negative signals at six-year trendline resistance could be signalling an overdue correction ahead.
In the E-mini Nasdaq monthly chart below you can see how the rally is now being held by the five-year trendline resistance.
Click to expand image
In the weekly chart we see how the E-mini Nasdaq topped a couple of weeks before the Emini Dow Jones. Again, a small series of negative candles formed. However, this week we are seeing a strong recovery back to the trendline. In order to clear the trendline, bulls will need to sustain a monthly close tonight above the high of 5995.75.
Click to expand image
Probably the most important US stock market of all is the S&P 500. In the monthly E-mini S&P chart below you can see how we have been unable to break the six-year trendline. This goes back to the end of 2011.
Click to expand image
Again, a significant negative candle formed on the weekly chart at the all-time high in the middle of August. This raises concerns of an imminent correction.
Click to expand image
The new all-time high at 2488.50 was followed by a swift sell-off of over 35 points by the end of the week. The sell-off more than took out the gains of the previous three weeks. In the week following we tried a recovery, but only made it up to 2474 before closing the week lower again.
I think these are strong enough arguments for a small correction in US stock markets. I’m not arguing for a significant downturn or a crash. Not yet anyway. But a move of 3-to-5% lower from where we are now would not be a surprise.

Jason Sen

Technical Analyst & Trader
For more information, trading education and offers visit Intertrader
The content of this article is the personal opinion of the author and not Intertrader. You should under no circumstances consider the information and comments provided as an offer or solicitation to invest. This is not investment advice. The information provided is believed to be accurate at the date the information is produced.

Share this post

Back to Blog

Spread betting and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 78% of retail investor accounts lose money when trading these products with this provider.
You should consider whether you understand how these products work and whether you can afford to take the high risk of losing your money.