S&P 500 Starting Quieter Week Above Key Technical Levels

Also, 2-year T-Note, Silver, Crude Oil, and Japanese Yen Futures 

1. S&P 500 E-mini futures (/ES): +0.38% 

2. Two-year T-note futures (/ZT): 0% 

3. Silver futures (/SI): +2.53% 

4. Crude oil futures (/CL): +0.92% 

5. Japanese yen futures (/6J): -0.49% 

What were perhaps the two most consequential weeks of the year for markets thus far–from the Magnificent 7 earnings to first-quarter 2024 U.S. GDP, the May Federal Open Market Committee (FOMC) meeting and the April U.S. jobs report–couldn’t deliver the crushing blow that bears so desperately needed.

Instead, on the other side of the torrent of binary event risk, U.S. equity markets have taken back more than half of the losses from their yearly highs while bond yields are down around 25 basis points (bps) across the curve from their highs at the end of April.

A limited calendar moving forward, with no major earnings releases or U.S. data drops, could allow recent short-term momentum conditions to continue.

No near-term complications for stocks

U.S. equity markets have a relatively cloudless sky ahead of them at present time, with no major earnings releases or significant U.S. macro data releases this week.

Technical resistances are starting to fall in both the S&P 500 (/ESM4) and Nasdaq 100 (/NQM4), suggesting that the corrective action seen in April has ended. All-time highs may soon be within reach again. The rate-sensitive Russell 2000 (/RTYM4) is the leader on the day amid the pullback in long-end U.S. Treasury yields. "Sell in May and go away' could look foolish, again.

Bond prices up

In the wake of the Treasury refunding announcement, May FOMC meeting, and April U.S. jobs report, bond prices find themselves trading higher than where they were a week ago.

Fed Chair Jerome Powell may have capped expectations of a potential rate hike in 2024, and while the timing of the first cut is open for debate, removing the tail risk of a potential hike has been a net-positive for bonds in the short-term.

The bond market may be the focal point for traders this week in the absence of any meaningful macro data or major earnings releases with three Treasury auctions in the coming days. 

Silver moves up

The continued pullback in U.S. Treasury yields coupled with a weaker U.S. dollar is proving to be a bona fide tailwind for metals on Monday.

Silver prices (/SIN4) are leading the way higher, having found support at the December 2023 swing high, and are now attempting to climb back over their one-month moving average as well as the uptrend from the February 29 and March 27 swing lows. /SIN4 has erased all last week’s losses at the time this report was written. 

Natural gas rises

Natural gas prices (/NGM4) are leading the charge higher today, breaking multi-week streak of resistance near 2.15, perhaps a sign that a more meaningful bottoming process is taking place. Attention remains on crude oil prices (/CLM4) as well, which after their steep pullback over the past two weeks are finding some brief reprieve on Monday. With no scheduled OPEC+ meeting on tap, traders will look towards the weekly EIA inventory data on Wednesday for clues.

A yentervention seems plausible

Two interventions last week may not have been enough to keep short sellers away from the Japanese yen (/6JM4) for long.

While the U.S. dollar is down versus every other major counterpart, /6JM4 is pacing the pack to the downside. Traders seem intent on maintaining the downtrend from the January and March swing highs, where /6JM4’s rally fell short on Friday.

Given Japanese officials’ stance that they won’t release intervention data until the end of the month, it makes sense another yentervention can’t be ruled out in the short-term. 

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

Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater

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