I believe the four major US indices that I track, S&P 500, Nasdaq 100, Down Jones Industrial Average and the Russell 2000 are currently being squeesed and are yet to choose an overall direction.

Market forces such as price corrections currently taking place within a key sector that are pulling the major indices down and on the flipside, favourable macroeconomic conditions pushing other sectors and industries to new highs and therefore limiting the downside of the major indices seem to be the significant forces currently at play.

I have trade ideas for long positions and short positions for the major indices depending on how the markets play out over the coming days and weeks. Lets take a closer look.

S&P 500 – NASDAQ 100

Currently there is a significant pullback happening amongst stocks, particularly within the tech sector. There is a lot of talk in the mainstream media about the possible bursting of the AI bubble and that this current correction could be just the beginning of bleak times ahead. This is I believe has contributed to the S&P 500 and the Nasdaq 100 indices (which are notably tech heavy) to fail to make new higher highs late last week or earlier this week.

The semiconductor index (image 1) has failed to make new highs and is currently stuck in a sideways range. There is a possibility if there is a larger correction, particularly with AI stocks, this index could make lower-lows which will inherently drag the tech heavy S&P 500 and Nasdaq 100 down to new lows if it begins such a trajectory.

As per image 2 & 3 below showing S&P 500 and Nasdaq 100 respectively, both of the major US indices are currently displaying signs of weakness in-line with the semiconductor index discussed above, having failed to make new highs, both indices are looking very sideways for the moment, with potential for shorts in the coming weeks if there is a larger more prolonged correction with tech and AI stocks.

Dow Jones Industrial Average – Russell 2000

These two indices are behaving differently as they are somewhat less tech-heavy compared to their S&P and Nasdaq counterparts and are therefore not being weighed down so much by the AI and tech pullbacks currently taking place.

Instead, the DJIA and Russ2000 are benefiting from bullish pushes being seen in other sectors and industries within the wider market such as:

The Health sector’s Pharmacutical industry (image 4), fuelled by tarrif exemptions on drugs.

The Consumer Discretionary sector’s Automobile (image 5) and Clothing industries (image 6), fuelled by general consumer demand, shifts in trends and specific Black Friday and Christmas demand.

Finance sector’s Banking industry (image 7), fuelled by rate cuts.

As per image 8 & 9 below showing Dow Jones Industrial Average and Russell 2000 respectively, both of these US indices are currently displaying signs of strength, so much so that both have just created new highs in the last few days.

If these two indices can continue to withstand bearish pressure from tech and AI stocks should they suffer larger corrections to the downside, or should the tech sectors correction stall or finish altogether, there is excellent potential for long positions to be taken on these two indices in the coming days and weeks.