Almost all of the U.S. and global markets volatility has taken place over the last 6+ trading days. Even though economic data continues to show a strengthening U.S. economy and improved jobs market, the news of the Omicron COVID variant has spooked the global markets. I'm going to illustrate how the markets are nearing critical support levels that are a "do-or-die" level for the market, in my opinion.
Let's get right into the charts.
NASDAQ Support Nears $15,721, Should Act As A Solid Floor
This NASDAQ chart highlights the orange support level near $15,271 that I believe will act as a hard floor, support, for the U.S. markets. We may see $14,750 become the next downside target level if the NQ falls below this level on strong selling. If this support level holds, then I expect the U.S. markets to resume a rally trend and attempt to target $17,000 or higher before the end of 2021.
Custom U.S. Stock Market Index Confirms Support Near $15,721
This Custom U.S. Stock Market weekly chart highlights the key support channel that originates in early 2021 and spans across recent lows (the dark blue line). My opinion is that the alignment of the $15,721 support level from the chart above and this key support channel on the Custom U.S. Stock Market Index chart creates a confluence of critical support. This level becomes a “do-or-die” level for the markets to attempt to bottom and recover going forward.
Custom Volatility Index Sets Up Deep Potential Bottom Level
Lastly, this weekly Custom Volatility Index chart highlights the multiple deep downside support ranges that have continued to drive future price rallies since the original COVID collapse. The current Custom Volatility Index level is below the last two pullbacks in the U.S. markets and well within the support channel from late 2020 and early 2021.
This Custom Volatility Index would clearly show a breakdown in the U.S. markets by moving below the 6.0 to 6.50 level on strong selling pressure. That is currently not happening, and I suspect the lack of real selling pressure reflects a panic selling mode – not a change in true price trend.
My opinion is the U.S. markets will struggle to hold near recent lows – attempting to hammer out a bottom/base over the next few days. If these critical support levels fail to prompt a bottom in price, we'll know soon enough. The markets can stay irrational far longer than many people expect.
The next two to 5+ trading days should clearly show us if these support levels and channels are solid or not. If the global markets are going to continue to move lower, we should find out soon enough.
If I'm correct and the markets do hold up near these support channels, we may begin to see a new "rip-your-face-off" rally phase to start a powerful Santa rally closing out 2021. That would be incredible to witness and experience.
Watch for support near $15,721 to $15,750 on the NQ over the next 5+ trading days. I believe that level is the "do-or-die" level for the markets going forward.