S&P 500, Nasdaq 100 Uptrends Start to Crack
S&P 500, Nasdaq 100 Uptrends Start to Crack
The S&P 500 is up 2.26% for the month so far
- U.S. stock markets are under continued pressure ahead of Nvidia earnings.
- Both the S&P 500 and Nasdaq 100 are beginning to break below uptrends from the October 2023 and January 2024 swing lows.
- The Russell 2000 is in the broad confines of a symmetrical triangle, indicating more range trading ahead.
After shuttering last week on a sour note, U.S. equity markets have continued to slip back in the first half of this week.
Anxiety over Nvidia’s (NVDA) earnings after the closing bell today may be driving broad market weakness in recent sessions. If NVDA can’t beat lofty expectations, the stars may be aligned for a deeper setback for U.S. equity markets. The second half of February is already a seasonally unfriendly time of the year for bulls, and now technical weakness is setting in that threatens the uptrend from the October 2023 lows.
/ES S&P 500 price technical analysis: daily chart (June 2023 to February 2024)
The S&P 500 (/ESH4) is down for three consecutive sessions for the first time since the first week of 2024, with the uptrend from the October 2023 and January 2024 swing lows coming under pressure. Likewise, /ESH4 is testing its daily 21-EMA (one-month moving average) which it hasn’t closed below since Jan. 5.
As we noted at the end of last week, it thus remains: “could a double top be forming near 5066.50? It’s certainly possible, but one wouldn’t trade around a potential double top pattern until support is broken, which comes at the weekly low at 4936.50."
Should 4936.50 break, then the measured move would call for a retracement to 4803.50. Until then, however, the bulls remain in control.” As things stand, the bulls are on the precipice of losing control.
/NQ Nasdaq 100 price technical analysis: daily chart (July 2023 to February 2024)
In our prior update, it was observed that “the Nasdaq 100 (/NQH4) offered an ominous signal on Friday, pushing above Thursday’s high while closing below Thursday’s low – a textbook bearish key reversal. This may portend another setback in the coming days. Even so, how deep might that go?
The /NQH4 remains in the uptrend from the October 2023 and January 2024 lows, and it hasn’t closed below its daily 21-sat EMA (one-month moving average) since January 5. Before traders can truly start looking lower, breaching both are necessary: a symmetrical triangle in the context of a broader uptrend, which is what has formed in recent days, is typically a continuation pattern higher.” Both conditions have been met.
In theory, a move back above the trendline from the October 2023 and January 2024 lows would negate the increasing bearish momentum setup. But barring that, which would likely need NVDA to blow away expectations, the technical path of least resistance may already be to the downside. /NQH4 is below its daily EMA envelope, while MACD and Slow Stochastics are trending lower. The next area of support comes into play near the late-December 2023 swing highs/late-January swing lows around 17165/225.
/RTY Russell 2000 price technical analysis: daily chart (August 2023 to February 2024)
While it appeared that the Russell 2000 (/RTYH4) made a bullish breakout attempt last week, the lack of continuation higher warrants a reconsideration of the technical interpretation on the charts.
A broader symmetrical triangle may have started forming in December 2023, which indicates that rangebound price action may be in the cards for the next several weeks. Contextually, support near 1900 and resistance near 2100 would appear stable for the near future. With the recent rise in volatility for /RTYH4 (IV Index: 27.5%; IV Rank: 61.5), directionless strategies like short strangles or iron condors may prove viable.
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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