S&P 500, Nasdaq 100 Hold Key Support
S&P 500, Nasdaq 100 Hold Key Support
Traders seem more optimistic today after seeing the string of gains broken last week
- U.S. stock markets started the year off by ending their winning streak of nine consecutive weeks of gains.
- However, technical signs are emerging that both the S&P 500 (/ESH4) and Nasdaq 100 (/NQH4) are basing at key near-term support.
- The Russell 2000’s (/RTYH4) technical picture is a bit more muddled.
Market update: S&P 500 down 1.12% month-to-date
2024 has started in a disappointing manner, but traders are taking a more optimistic approach in the second week of the year. Three of the four major U.S. indexes are trading in the green today, continuing the rebound off the pre-jobs report lows of last week. In particular, both the S&P 500 (/ESH4) and Nasdaq 100 (/NQH4) have turned the July 2023 high into support, suggesting the multi-month uptrend of higher highs and higher lows remains intact.
Outside of the December U.S. inflation report on Thursday, it’s a quiet macroeconomic calendar in the coming days, while earnings season begins in earnest with banks reporting at the end of the week. Until then, a few obstacles are preventing the nascent rebound from continuing.
/ES S&P 500 Price Technical Analysis: Daily Chart (April 2023 to January 2024)
The S&P 500 (/ESH4) has staged an important technical reversal higher in recent sessions. Friday’s doji candlestick at the bottom of a downtrend has been greeted by a bullish piercing candle today, all while turning back above the daily 21-EMA (one-month exponential average) and the July 2023, around 4738/45. While momentum is not uniformly bullish, it’s worth noting the divergence in slow stochastics and MACD (moving average convergence/divergence indicator) cater to a bullish resolution. Although volatility is unimpressive (IV Index: 13.2%; IV Rank: 10.8), selling put spreads around last week’s low may prove to be a viable short-term approach.
/NQ Nasdaq 100 Price Technical Analysis: Daily Chart (June 2023 to January 2024)
The setup in the Nasdaq 100 (/NQH4) is cleaner than in /ESH4. The July and November 2023 swing highs near 14400 have held as support in recent days, with a morning star candlestick pattern (bullish bottoming signal) forming at the former key resistance level from last year. /NQH4 is also reestablishing itself above its daily 21-EMA. Slow stochastics have issued a buy signal after having exited oversold territory; the divergence in both slow stochastics and MACD points to a rebound in the short-term. Like in /ESH4, selling put spreads in /NQH4 around last week’s low may prove to be a viable option for the coming days.
/RTY Russell 2000 Price Technical Analysis: Daily Chart (July 2023 to January 2024)
The Russell 2000 (/RTYH4) has been the weakest major index at the start of the year, although it’s trying to make up some of that difference today. The key difference between /RTYH4 and /ESH4 and /NQH4 is that the former one has been summarily rejected in attempting to break through multi-year range resistance, while the latter two have merely eased back after hitting all-time highs at the end of December. There’s more work to be done for /RTYH4 to have a cleaner technical setup, but one additional fact remains: /RTYH4 is more appealing for options traders (IV Index: 22.5%; IV Rank: 36.5) than any of the other major indexes.
Christopher Vecchio, CFA, tastylive’s head of futures and forex, has been trading for nearly 20 years. He has consulted with multinational firms on FX hedging and lectured at Duke Law School on FX derivatives. Vecchio searches for high-convexity opportunities at the crossroads of macroeconomics and global politics. He hosts Futures Power Hour Monday-Friday and Let Me Explain on Tuesdays, and co-hosts Overtime, Monday-Thursday. @cvecchiofx
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