Breaking glass
Image courtesy of Shutterstock

S&P 500, Nasdaq 100 Breakout to All-Time Highs

By:Christopher Vecchio, CFA

Volatility continues to pull back, but the resiliency of stocks in the face of the continued decline in Fed rate cut odds is the real story

  • U.S. stock markets have staged a sharp rally over the past three sessions.
  • The S&P 500 (/ESH4) and Nasdaq 100 (/NQH4) are slowly but surely marching to another round of fresh all-time highs.
  • The Russell 2000 (/RTYH4) has rebounded meaningfully from multi-month uptrend support.

Fig. 1: Week-to-date price percent change chart for /ES, /NQ, /RTY, and /YM
Fig. 1: Week-to-date price percent change chart for /ES, /NQ, /RTY, and /YM

The start of the new week is off to a solid start, with each the four major U.S. equity markets trading higher.

A bit of capital rotation appears to be the driving factor on Monday, given the outperformance of small caps relative to their large cap counterparts, and moreover, the equal weighted Nasdaq 100 (+0.44%) is outperforming the market cap weighted Nasdaq 100 (+0.11%).

Resiliency remains strong

Volatility continues to pull back, but the resiliency of stocks in the face of the continued decline in Fed rate cut odds is the real story here.

After opening last week at 81%, the odds of a 25-basis-point (bps) rate cut in March are now a mere 43%. But Treasury bonds aren’t weakening on the adjustment anymore, perhaps contributing to the move higher in stocks at the start of the week.

U.S. economic data has been starting to surprise to the upside, which in a "good news is bad news" world leaves open the question if yields have stopped climbing, but for now, apparently, it’s not a concern.

Accordingly, in the short-term, the recent push higher in stocks is technically cleared to continue. Momentum has quickly turned positive across the board, and markets at fresh all-time closing highs demand respect.

/ES S&P 500 price technical analysis: daily chart (May 2023 to January 2024)

/ESH4

The S&P 500 (/ESH4) is higher on Monday, although it is closing off its intraday highs. What was looking like a head and shoulders pattern morphed into an inverse head and shoulders pattern, and while technically not called that at a top, it does signal continuation to the upside in the near-term; the measured move calls for a gain into 4981 before exhaustion.

Bullish momentum has reasserted itself. /ESH4 is above its daily 5-, 13-, and 21-day exponential moving average (EMA) envelope, which is in bullish sequential order. Slow stochastics are trending higher into overbought territory, while moving average convergence/divergence (MACD) is on the cusp of issuing a bullish crossover while above its signal line. With volatility declining, traders may prefer long ATM call spreads as opposed to short OTM put spreads as a way to express a bullish point of view.

/NQ Nasdaq 100 price technical analysis: daily chart (June 2023 to January 2024)

/NQH4

The Nasdaq 100 (/NQH4) still holds the title of the most bullish structure among all four major equity indexes.

Although it moved off of its highs, the close on Monday marks a fresh all-time closing high. /NQH4 is also above its daily 5-, 13-, and 21-EMA envelope, which is in bullish sequential order. Slow stochastics are moving even higher into overbought territory, while MACD is trending higher while above its signal line. Similar to /ESH4, with volatility declining, traders may prefer long ATM call spreads as opposed to short OTM put spreads as a way to express a bullish point of view in /NQH4.

/RTY Russell 2000 price technical analysis: daily chart (July 2023 to January 2024)

/RTYH4

Last week it was noted that “the area around 1925/35 is critical support in the coming sessions; a break below this support would see the uptrend from the October and November 2023 swing lows broken.”

Indeed, the Russell 2000’s (/RTYH4) low close last week was 1925, and the rally since has constituted a solid defense of the uptrend. Furthermore, the downtrend from the late-December and early-January swing highs has been broken. Momentum is slowly turning the corner, but traders now have a clearly defined level of support from last week to trade around; failure below last week’s low would confirm a top.

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

For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro.

Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.


Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Related Posts

tastylive content is created, produced, and provided solely by tastylive, Inc. (“tastylive”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, digital asset, other product, transaction, or investment strategy is suitable for any person. Trading securities, futures products, and digital assets involve risk and may result in a loss greater than the original amount invested. tastylive, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastylive is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparisons, statistics, or other technical data, if applicable, will be supplied upon request. tastylive is not a licensed financial adviser, registered investment adviser, or a registered broker-dealer.  Options, futures, and futures options are not suitable for all investors.  Prior to trading securities, options, futures, or futures options, please read the applicable risk disclosures, including, but not limited to, the Characteristics and Risks of Standardized Options Disclosure and the Futures and Exchange-Traded Options Risk Disclosure found on tastytrade.com/disclosures.

tastytrade, Inc. ("tastytrade”) is a registered broker-dealer and member of FINRA, NFA, and SIPC. tastytrade was previously known as tastyworks, Inc. (“tastyworks”). tastytrade offers self-directed brokerage accounts to its customers. tastytrade does not give financial or trading advice, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastytrade’s systems, services or products. tastytrade is a wholly-owned subsidiary of tastylive, Inc.

tastytrade has entered into a Marketing Agreement with tastylive (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade. tastytrade and Marketing Agent are separate entities with their own products and services. tastylive is the parent company of tastytrade.

tastycrypto is provided solely by tasty Software Solutions, LLC. tasty Software Solutions, LLC is a separate but affiliate company of tastylive, Inc. Neither tastylive nor any of its affiliates are responsible for the products or services provided by tasty Software Solutions, LLC. Cryptocurrency trading is not suitable for all investors due to the number of risks involved. The value of any cryptocurrency, including digital assets pegged to fiat currency, commodities, or any other asset, may go to zero.

© copyright 2013 - 2024 tastylive, Inc. All Rights Reserved.  Applicable portions of the Terms of Use on tastylive.com apply.  Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastylive’s podcasts as necessary to view for personal use. tastylive was previously known as tastytrade, Inc. tastylive is a trademark/servicemark owned by tastylive, Inc.