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S&P 500 has broken down – will it follow falling NASDAQ?

Both leading indices of US stock market, S&P 500 and NASDAQ, are not in the best shape. The fear of interest rate hikes by Fed is apparently slowly showing in the charts. We will thus look at both of these indices and try to see where they can be heading.

Nasdaq has lost 15 % from its ATH

When we look at NASDAQ, one thing is clearly visible. We are now witnessing the biggest drawdown since march 2020. This technology index has lost about 15 % from its ATH. What is even worse is the fact that the fall seems to be stronger now. Usually, the breakdowns start with sharp downward movement and then seem to slow down and gradually move to the side. That is not what we are seeing with NASDAQ. This index has firstly moved to the side and slowly started to decrease. As of now the falls are getting stronger and more significant.

Looking at the chart, I can see the closest support at around 175 – 177 points. But no one can rule out a possibility of even stronger breakdown below that level. Since March 2020 bottom NASDAQ increased in value by almost 200 % almost without any correction. So even a 30 – 40 % correction is still in line with usual movements of stock market due to the previous rise.

Daily chart of NASDAQ Daily chart of NASDAQ

S&P 500 looks a bit better

S&P 500 has lost about 5 % from its ATH, which is not a big deal, since S&P 500 rose at an incredible speed of 120 % since March 2020. It is thus possible to see 30 % drawdown even here without anyone worrying, since the index has been rising for 2 years without any correction. We have seen a few sharp downward movements, but most of them have been quickly brought back up to new ATH.

S&P 500 also fell below its structure and currently is creating lower highs and lower lows on a daily chart. This is a first sign of a change of trends. Yet, here it is not as critical as with NASDAQ. But we can see that this index is also starting to be a bit in trouble and I would not be surprised if it continues with the declines.

Daily chart of S&P 500 Daily chart of S&P 500

Jakub is a crypto trader and founder of Trader 2.0 project, which helps hundreds of traders from central Europe to understand cryptocurrency trading and its challenges. Jakub not o...

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