US markets begin an overdue correction to ease overbought conditions
The E-mini S&P 500 has been in a powerful bull run since the end of December. The 284-point rally topped exactly at two-month trendline resistance at 2896/99. Note how resistance at the upper Bollinger band on the four-hour chart also held and the index sold off to hold the lower Bollinger band.
The negative engulfing candle is a minor sell signal on the daily chart in severely overbought conditions. (A break above 2905 is required to target 2912/14, then 2924/26.)
We need a small correction to ease severely overbought conditions now so a drift lower would not be a surprise. Yesterday we held two points above first support at 2875/73 but a break below 2870 risks a slide to 2860/58. Below here look for 2854/53 then a buying opportunity at 2846/44, with stops below 2840.
The E-mini Dow Jones hit profit-taking in severely overbought conditions. We held short-term 38.2% Fibonacci support at 26110/100 but more important is the two-month trendline support at 26060/040. Long positions need stops below 26010. Further losses would target 25975/965, perhaps as far as 25910/900.
The first resistance is at 26250/260. Gains are likely to be limited but above here try short positions at 26315/325 with stops above 26360.
The Nasdaq 100 is holding minor resistance at 7636/40 after the break higher in overbought conditions. Above here look for 7655/60, perhaps as far as 7683/86.
Holding minor resistance at 7620/15 targets 7600/97, then 7590/87, before good support at 7580/78. We bottomed exactly here in fact but further losses today target 7562/60. A break lower is a minor sell signal targeting 7545, perhaps as far as 7525/22.
Technical Analyst & Trader
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