S&P 500, Nasdaq 100 and Dow Jones leave dubious candles at record highs

It was the Nasdaq 100 which took the lead on Thursday as it inched its way to a fresh all-time high. I’ll admit to not being convinced by it, given it only closed a few points above the December high. Yet Wall Street indices moved higher in tandem on Friday with bullish range-expansion bars which also saw the S&P 500 and Dow Jones print new all-time highs.

Monday’s open also appeared to be off to a strong start, with all three indices gapping higher at the open and extending their lofty gains. Yet the gains were not to last, and clues are building that the rally may be nearing a point of exhaustion.

The Nasdaq 100 closed lower on the day with a small upper wick and nearly closed its opening gap. Whilst the S&P 500 kept most of its gap open, a potential island reversal candle has formed. We need to see prices gap lower at the open on Tuesday to confirm it as such, but they can mark important market tops. And whilst the Down Jones closed above its open, two-thirds of the daily range are found at the upper wick, which means a potential shooting star candle has formed at a record high.

Furthermore, the daily ranges were relatively small and coupled with above-average volume, which can signify a ‘change in hands’ between buyers to sellers. This is confirmed with the negative delta volume as it means there were more offers (sellers) than bids (buyers). I only have access to volume data for the S&P 500 and Nasdaq 100, but two out of the three is good enough for me to assume something is not right at these highs. And finally, the fact we have seen such small-ranged, high-volume candles which formed beyond the upper Keltner band on the S&P 500 and Nasdaq, and on it for the Dow Jones, further suggests the rally is at the very least losing steam.

AUD/USD, NZD/USD hint at round of risk-off

We also have bearish clues form the commodity FX space, which tend to underperform during bouts of risk off. Both AUD/USD and NZD/USD formed bearish outside days and closed beneath their 200-day averages and EMAs. Should prices remain beneath 66c, then AUD/USD bears seem to have 65c in mind whilst NZD/USD bears likely have 60c in mind. And if risk-off ensues, it likely means a pullback for US indices from their record highs and another leg lower for AUD/USD and NZD/USD.

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Please ensure you fully understand the risks involved by reading our full risk warning.

FOREX.com is a trading name of StoneX Europe Limited, and FOREX.com/ie is a domain operated by StoneX Europe Ltd, a member of StoneX Group Inc. StoneX Europe Ltd, is a Cyprus Investment Firm (CIF) company registered to the Department of Registrar of Companies and Official Receiver with a Registration Number HE409708, and authorized and regulated by the Cyprus Securities & Exchange Commission (CySEC) under license number 400/21. StoneX Europe is a Member of the Investor Compensation Fund (ICF) and has its registered address at Nikokreontos 2, 5th Floor, 1066 Nicosia, Cyprus.

StoneX Europe Limited is registered with the German Federal Financial Supervisory Authority (BaFin). BaFin registration ID: 10160255

FOREX.com is a trademark of StoneX Europe Ltd, a member of StoneX Group Inc.

The statistical data and the awards received refer to the Global FOREX.com brand.

This website uses cookies to provide you with the very best experience and to know you better. By visiting our website with your browser set to allow cookies, you consent to our use of cookies as described in our Privacy Policy.

Through passporting, StoneX Europe is allowed to provide its services and products on a cross-border basis to the following European Economic Area ("EEA") states: Austria, Bulgaria, Croatia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden.

Additionally, StoneX Europe Ltd is allowed to provide Investment and Ancillary Services to the following non-EU jurisdiction: Switzerland.

StoneX Europe Ltd products, services and information are not intended for residents other than the ones stated above.

Tied Agent Information: KQ Markets Europe Ltd with Company No. HE427857.
Address: Athalassas 62, Mezzanine, Strovolos, Nicosia Cyprus.
Services Provided: Reception and Transmission of Orders.
Commencement Date: 06/12/2022
Website: KQ Markets - CFD Trading | KQ Markets

We may pay inducements, such as commissions or fees, to affiliates or third-party introducers for referring clients to us. This is in line with regulatory guidelines and fully disclosed where applicable.

StoneX Europe Ltd may make third party material available on this website which may contain information included but not limited to the conditions of financial markets. The material is for information purposes only and does not contain, and should not be construed as containing, investment advice and/or investment recommendation and/or an investment research and/or an offer of or solicitation for any transactions in financial instruments; any decision to enter into a specific transaction shall be made by the client following an assessment by him/her of their situation. StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.