US Market Turbulence: US Indices Losing Steam?

Overview

• Dow Jones (US30): Broke below key support, bearish momentum intact, resistance at 45,068.05 still strong.
• Nasdaq (US100): Rejected from all-time high levels, back inside range, testing equilibrium.
• S&P 500 (US500): Below equilibrium, next target at 5,907 if no bullish reversal occurs.

The recent downturn in major U.S. stock indices—namely the Dow Jones Industrial Average (US30), Nasdaq Composite (US100), and S&P 500 (US500)—can be attributed to a confluence of economic data and geopolitical factors that have unsettled investor confidence.

Key Factors Contributing to the Decline:

1. Deteriorating Consumer Sentiment: The University of Michigan reported a significant drop in consumer sentiment for February, reaching its lowest point since November 2023. This decline is largely due to concerns over tariffs and rising inflation expectations, which have dampened consumer confidence.
2. Weak Housing Market Data: January saw a sharper-than-expected decline in existing home sales, influenced by elevated mortgage rates and high property prices. This suggests potential challenges in the housing sector, raising alarms about broader economic health.
3. Contraction in the Services Sector: The Purchasing Managers Index (PMI) indicated an unexpected contraction in the U.S. services sector for the first time in over two years. Given that this sector comprises approximately 70% of the U.S. economy, its downturn is particularly concerning.
4. Escalating Trade Tensions: President Donald Trump's announcement of new tariffs on imports, including steel and aluminum, has heightened fears of a global trade war. This uncertainty has increased demand for gold, with prices nearing all-time highs.
5. Hedge Fund Sell-Off in Tech and Media: Leading up to February 21, hedge funds exited U.S. tech and media stocks at the fastest pace in six months. This mass exodus, particularly from AI-related and communication equipment companies, has exerted additional downward pressure on the tech-heavy Nasdaq.

DOW: Range Breakdown and Bearish Volume Imbalance

After an extended period of consolidation, the Dow Jones (US30) failed to hold its ground, breaking decisively below support. The bearish volume imbalance suggests sellers are in control, with resistance at 45,068.05 remaining intact unless price revisits and breaks through this level.

4-Hour Chart: No Signs of Strength

On the 4-hour timeframe, bearish momentum is evident, with long red candles dominating the chart. There are no clear signs of a market structure shift or potential reversal to the upside.

Short Opportunity: Reversal Pattern at Daily FVG

If price forms a reversal pattern within the Daily Fair Value Gap (FVG), a continued move lower could unfold. As long as price fails to break and hold above this level, short positions remain valid.

Nasdaq (US100): Rejected from Key Resistance

Failed All-Time High Breakout

The Nasdaq (US100) attempted an all-time high breakout but failed to sustain momentum, leading to a sharp rejection.

Massive Sell-Off at Market Open

Right at the New York open, Nasdaq saw a sharp sell-off, dragging price back inside the range. Currently, price is testing the equilibrium level, an important decision point for further movement.

4-Hour Fair Value Gap: Break or Reversal?

Two scenarios could unfold at this 4-hour FVG:

1. Rejection for downside continuation
2. Breakout above for a bullish move

For now, momentum remains slow as Nasdaq consolidates.

S&P 500 (US500): Approaching Key Support at 5,907

Trading Below Equilibrium, No Strength Yet

The S&P 500 (US500) also failed to hold its all-time high level, pushing price below equilibrium. If buyers do not step in, the next key level to watch is 5,907.

Momentum remains weak, and further downside is possible. Short setups could emerge within the H1 Fair Value Gaps, targeting 5,907 if no reversal structure appears.

Final Thoughts

All three major U.S. indices are showing bearish pressure, failing to hold key resistance levels. Traders should watch for:
✔ Key resistance retests (potential rejections for continuation)
✔ Fair Value Gaps (for potential short setups)
✔ Any signs of bullish structure shifts (to invalidate downside momentum)

With economic uncertainty and technical breakdowns aligning, short opportunities remain favorable until proven otherwise.

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