On Thursday, we took a look at several angles of support and resistance in the S&P 500 and Nasdaq 100 as points of reference for short-term trades. Yesterday, the S&P and Nasdaq both backed off hard from top-side resistance and found buyers at the lower lines of support.
Overnight we saw more heavy selling in Europe and bank stocks on continued concerns over the situation surrounding Deutsche Bank. The DAX gapped sharply lower, but is trying to muster a rally off key support (see earlier commentary regarding this). Keep an eye on the DAX, if it can rebound from here on negative news it would be a general positive for risk sentiment.
DB Jitters spilled over into the US, but since seeing the DAX stabilize US index futures are paring minor initial damage. Overall, the market is not telling us the Deutsche situation is a major cause for concern at this time given the muted response.
Where is the rebound coming from today? Once again, from the lower parallels the market held yesterday. The test and hold of those lower lines of support are further reinforcing their importance.
S&P 500: Hourly
(Click on image to enlarge)
For the market to sustain higher trade these lines of support will need to continue to hold, a break, given the number of inflection points, would likely spur a sizable amount of selling. The Nasdaq 100, in particular, be bearish given it would trigger a neckline break of a head-and-shoulders pattern.
Nasdaq 100: Hourly
(Click on image to enlarge)
On this end, the fact the market is shrugging off bad news is viewed as a positive, so as long as support holds a rally could be sparked on a return in confidence. But, again, support breaks, so does our view and we will adjust accordingly.
Dialing out to the daily chart, a hold in the S&P here and trade back higher would continue to fill out a wedge pattern, something we will visit later should it come to fruition.
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