Rebalancing continues as Tech dives – Dow Jones & US Index Outlook

• Stock Benchmarks maintain strong divergence with the Dow Leading while Nasdaq falls
• Tech sector is being rejected from high valuations and AI repricing
• Exploring Technical Levels for the Dow Jones, Nasdaq and S&P 500

The age of passive investing is now long gone.

Tech investors who had the easy job of buying and waiting to generate enormous returns are now under heavy scrutiny as a new age commences.

As expressed in this excellent piece, AI is now reaching the stage of creative destruction.

As the AI Bull trend began, almost everything remotely linked to Tech and Semiconductors was getting lifted in a hurry. Still, the funnel is reducing back towards the real winners and losers of the Revolution – And there will be many.

The Tech sector remained pushed by the new era of internet dominance across purchasing behaviors and new ways to interact between buyers and sellers – look at Airbnb and Uber, for example.

For example, individuals now use AI for a wide range of uses, including research, coding, writing emails, and more.

So logically, many of the Tech firms that specialize in these areas will now be useless middlemen.

So what are investors turning to? Value.

AI won't replace potato fields (at least for now) or replace chemists, machine producers, etc.

Surely, it will assist and improve the efficiency of these traditional processes, but it definitely won't replace the firms that provide what humanity needs to live.

In that regard, Farming, Healthcare, Consumer Defensives, Homes & Building, Railroads, etc., are seeing some new inflows, which are translating into the Dow Jones' outperformance against the Nasdaq.

The Dow Jones to Nasdaq ratio, mentioned in our previous day Stock Market analysis actually just broke back above the key 2.00 level – Watch for the development of a new trend for Stocks here.

Let’s dive into today’s session charts and key trading levels for the major US indices: the Dow Jones, Nasdaq, and S&P 500 as profit-taking flows could confirm the broader range.

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Even with some of the Mag 7s rebounding, the overall Tech sector (which represents a large part of the S&P 500 and Nasdaq) is in the red while almost everything else is up.

Google's earnings after the close will surely impact these flows but the rest is too see how much it does.

The divergence is now quite visual with the Dow Jones testing its all-time highs while Nasdaq trends lower (see below).

Still, a couple of technical warnings are arising.

The short-term price action is forming a bearish RSI divergence and coupling this with the inability to decisively break the 49,650 Resistance area, the outlook isn't immediately bullish.

The picture remains rangebound, as confirmed by the flat 200-period 2H MA.

A decisive break and close above 50,000 would cement the bull case for the DJIA.

Dow Jones technical levels for trading:

Resistance Levels

• ATH Resistance From 49,600 to 49,700
• Tuesday Highs 49,681
• All-time Highs 49,710 (CFD) – Index ATH is at 49,653
• 50,000 Potential Psychological Resistance

Support Levels

• Intraday Pivot 49,200 to 49,350
• Pivotal Support – 49,000 to 49,100 (Bull above, Bearish below)
• Intraday Support 48,600 to 48,700
• Key Support around 47,500
• 45,000 psychological level (Main Support on higher timeframe)

Having broken its Greenland-Crisis lows, the picture looks very different compared to the Dow Jones and now looking decisively bearish.

A measured move to the downside (purple square) is developing, hinting at the current selloff stalling at around 24,600.

Depending on Alphabet earnings, the index could see some dip-buying around here but Bulls will have to push back above 25,100 to help with the bearish prospects.

Nasdaq technical levels of interest:

Resistance Levels

• Minor Support now Pivot 25,000 to 25,250
• Mid-range Pivot 25,200 to 25,500 +/- 75 pts
• Pivotal Resistance 25,700 to 25,850
• 26,246 FOMC highs
• All-time high resistance zone 26,100 to 26,300

Support Levels

• Measured Move target ~24,600
• 24,500 to 25,600 Key Support
• October - November Support 23,800 to 24,000
• Early 2025 ATH at 22,000 to 22,229 Support

The outlook for the S&P 500 isn't much brighter than its Higher-Beta tech peer.

Another measured move to the downside is forming in the Spoose and hinting at a test of the 6,810 level.

Any break below will give a pretty nasty look on the bigger picture.

S&P 500 technical levels of interest:

Resistance Levels

• Key Pivot Zone 6,880 to 6,900
• Previous ATH Resistance 6,945 to 6,975
• Session highs 6,950
• Current ATH 7,020
• All-time High Resistance 7,000 to 7,020

Support Levels

• Mini-Support 6,830 to 6,850
• 6,810 measured move target
• 6,800 Psychological Support
• 6,789 Greenland lows
• 6,400 Major psychological support

Safe Trades and keep an eye on headlines!

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