Technical outlook for Dow Jones and Nasdaq 100 continues to diverge

Technical highlights of the US indices:

• Nasdaq 100 could dig a macro-sized wedge
• Dow Jones Low May Just Be The Beginning Of The Bullish Flag

Technical outlook for Dow Jones and Nasdaq 100 continues to diverge

This year has brought with it a series of very interesting rotations between old school and new school stocks, which regularly have Dow and Nasdaq 100 marketplaces. This theme doesn’t look likely to end anytime soon, we will therefore have to continue to examine these two major indices through their own technical objective.

The Nasdaq 100 took over leadership from the Dow Jones, which led it to register territories again. The current trend is strong and difficult to combat, but there is a possibility of weakness here that could complement a pattern that has been in the works since February.

If the NDX pulls out, it could complete a well-formed wedge pattern that, at some point, will likely lead to a big move this summer. The trend is on the upside and as such it looks like such a breakout would occur on the upside, but we wouldn’t be able to rule out the possibility of it turning into a top formation.

For now, again, we will want to respect the force. If lower from here, look below the wedge pattern (also the September trendline) for support, currently just above 13400.

Nasdaq 100 Daily Chart (coin possibility)

Nasdaq 100 Chart by TradingView

The Dow Jones has just flipped over and carved out a low from May, the first medium-term low since late October. This turned out not to be a sign of further weakness to come, but rather a low that led to a rally to the US election and beyond.

A similar scenario could play out here where it is the end of a correction. If it takes a while to go back and fill in, it can even fill in a bullish flag pattern. Both the March trendline and the June slope have been broken, so there are still concerns about the price going down, and on that, it may be best to wait for further developments before dialing a bullish bias.

But if that pattern does develop and the Dow Jones gets stronger, then expect that to take some power out of the Nasdaq 100 as the rotation returns in favor of value over growth.

Dow Jones Daily Chart

Dow Jones Chart by TradingView

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— Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX