#INDICES Forecast: #NASDAQ,#DOWJONES & #SP500 (15 AUGUST 2022)

 

Dow Jones Technical Analysis: Index Continues to Rise

Our expectations indicate the continuation of the index's rise during its upcoming trading.

The Dow Jones Industrial Average Index continued to rise during its recent trading at the intraday levels, to achieve gains for the third consecutive day, by 1.27%. It added about 424.38 points, and settled at the end of trading at the level of 33,761.06. This came after rising during Thursday's trading by 0.08%. Last week, the index advanced by 2.92%.

Preliminary results for August showed that the University of Michigan Consumer Confidence Index rose to 55.1 from 51.5 in July, market expectations were for a rise to 52.5, and the survey showed that the expected inflation rate for next year fell to 5%, the lowest level since February February, as energy prices continued to fall.

Meanwhile, San Francisco Fed President Mary Daly said her main issue for the FOMC meeting in September was a 50 basis point increase in the federal funds rate and was open about a big raise.

There is now a close to 56% chance of a 50bp rate hike on September 21st, while 45% of market participants are pricing in a 75bp hike.

The Bureau of Labor Statistics reported that US import prices fell 1.4% in July after advancing in June, more than economists had estimated for a 0.9% decline.

Technical Analysis

Technically, the index continues to rise, affected by its exit from the range of a descending corrective price channel that limited its previous trading in the short term, as shown in the attached chart for a period of time (daily), supported by the influx of positive signals on the relative strength indicators, despite it reaching overbought areas, as the index is benefiting from the continuous positive pressure of its trading above its simple moving average for the previous 50 days.

Therefore, our expectations indicate the continuation of the index's rise during its upcoming trading, especially throughout its stability at the highest level of 33,240, to target the first resistance levels at 34,117.75.

NASDAQ 100 Forecast: Pushing Against Downward Pressure

Given enough time, I do think we will have a wicked pullback, but if we break above the 13,500 level, that opens up the gates for even more rallies.

• The NASDAQ 100 Index rallied a bit again on Friday as we continue to see the market “climb the wall of worry.”
• After all, the market will continue to see a lot of noisy behavior, and therefore volatility. It is a difficult market to hold onto, but for those that have, they have been rewarded.

The 13,500 level above is likely to be a significant barrier, just as we had seen during the trading session on Thursday. Ultimately, if the market were to struggle in this area, then it’s likely that the market would struggle a bit of the time to try to get above there. On the other hand, if we break down below the massive red candlestick from the trading session on Thursday, then I think we have a pullback to the 13,000 level just waiting to happen.

Federal Reserve at the Center

Unfortunately, this will have nothing to do with the companies or the economy. Everything is going to be about the Federal Reserve and the idea of what they will be doing as far as interest rates. The Federal Reserve still swears up and down that they are going to do whatever they can to fight inflation, which is the same thing as saying they are going to keep monetary policy tight. However, Wall Street has run with the narrative that they are going to have to be less restrictive with monetary policy due to the fact that inflation has slowed a bit. However, it’s unfortunately still much above the Federal Reserve target rate, which is 2%. In fact, inflation is still roaring at 8.5% year-over-year, so it does make a certain amount of sense that we would see tight monetary policy going forward.

At this point, you can take a look at the 10-year yield in the United States to see how things play out for the stock market overall. If we see a sudden sharpening in rates, that would be negative for stocks. At the moment, the falling rates have propelled the market to the upside, but the reality is that the rates are falling because a lot of bond buyers are preparing for a recession. That obviously is not good for the market as well. Given enough time, I do think we will have a wicked pullback, but if we break above the 13,500 level, that opens up the gates for even more rallies. The average bear market rally is roughly 21%, which is just where we happen to be at.

S&P 500 Forecast: Swimming Upstream

At this point, I would not chase the market, but you certainly cannot sell it until we see something happen in the bond market that shows traders are taking the Federal Reserve seriously again.

• The S&P 500 Index rallied quite nicely on Friday, and we threatened the top of the shooting star from the previous day.
• If the market does break above the top of the shooting star, then it opens up the possibility of the 4300 level being targeted.
• The 4300 level is an area that I think you will have to continue to see a lot of interest in, as it had been massive resistance previously.

If we were to break above the 4300 level, then it is possible that the market would really start to take off at that point. Not only would it be a break of significant resistance, would also show the market clearing the 200-day EMA, which is obviously a very bullish sign as well. At this point, we are getting a little overextended, but this is all about the interest rates in America more than anything else.

Tightening Monetary Policy

The Federal Reserve lost so much credibility over the last 14 years that the market is completely ignoring the fact that they continue to reiterate that they are going to tighten monetary policy. These clowns have spoon-fed Wall Street for so long, that they do not understand the idea of a tightening monetary policy for any significant amount of time. Because of this, the market is swimming upstream, but if there does come a point where Wall Street finally believes that the Federal Reserve is going to fight inflation for real, this market is going to crater.

What it is worth, markets typically gain about 20% during bear market rallies, and we are clearly at that point over in the NASDAQ. In other words, we could be getting close to the end, and that’s why think the 4300 level above is so interesting. The candlestick on Thursday looks like a really good beginning to a pullback, but at this point, it looks like we still have some work to do. If the market is comfortable holding the S&P 500 E-mini contract through the weekend, that would be a very bullish statement as well. At this point, I would not chase the market, but you certainly cannot sell it until we see something happen in the bond market that shows traders are taking the Federal Reserve seriously again.

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