Technically Speaking, the S&P and Nasdaq 100 are Pointing in This Direction...

By:Christopher Vecchio - CFA

...but the technical outlook on the Russell 2000 is a bit murkier.

  • Between June 16 and June 26, /ES and /NQ declined in five of six trading sessions.
  • The recent pullbacks in /ES and /NQ produced returns to their one-month moving averages, but technical momentum didn't become outright bearish.
  • The rebound in /RTY at former resistance is a positive development for risk appetite broadly.

Year-to-date price percentage change chart for /ES, /NQ, and /RTY
Year-to-date price percentage change chart for /ES, /NQ, and /RTY

Market update: Nasdaq 100 up +37.67% year-to-date

Despite starting the month with a great deal of uncertainty around a potential U.S. default, U.S. equity markets have produced solid gains throughout June. While a brief setback starting Friday, June 16, tempered gains, constructive price action in this final week of the month has now positioned the S&P 500 (/ES), the Nasdaq 100 (/NQ) and the Russell 2000 (/RTY) on constructive technical footing heading into July.

/ES gold price technical analysis: daily chart (June 2022 to January 2023)

/ES gold price technical analysis: daily chart (June 2022 to January 2023)

At the start of this month, /ES broke through ascending triangle resistance that has been in place since September 2022. The seeds of the turn higher were planted earlier, however, when /ES closed above its daily 21-EMA (one-month exponential moving average) on May 25. It has not closed below its daily 21-EMA since then.

The pullback seen between June 16 and June 26 did not breach the daily 21-EMA, and momentum indicators did not return to oversold territory, a critical development that would be necessary if the month-long uptrend were to be declared dead. Instead, Slow Stochastics are turning higher while still above their median line, and the moving average convergence/divergence (MACD ) is close to issuing a fresh bullish crossover while about its signal line. With measures of volatility depressed (/ESU3: IV Index – 13.5%; IVR – +2.1) and the technical structure retaining its bullish bias, a return to a through-the-yearly-high of 4493.75 could be achieved by early July.

/NQ gold price technical analysis: daily chart (June 2022 to January 2023)

/NQ gold price technical analysis: daily chart (June 2022 to January 2023)

/NQ has had a more consistent bullish momentum profile than either /ES or /RTY, having closed above its daily 21-EMA every session since May 5. Momentum indicators have retained their bullish hue the entirety of this period as well, with MACD holding above its signal line and Slow Stochastics nestled consistently in overbought territory. Like in /ES, Slow Stochastics are now turning higher above their median line, and MACD is on the verge of issuing a bullish crossover while above its signal line. The path of least resistance may prove to be a move back to the yearly high of 15,474.50.

/RTY gold price technical analysis: daily chart (June 2022 to January 2023)

/RTY gold price technical analysis: daily chart (June 2022 to January 2023)

The technical picture is not as clearly bullish for /RTY as it may be for /ES and /NQ, but there has been a meaningful bullish technical development over the past few days which reinforces a belief in improving risk appetite. A morning star candlestick pattern (highlighted from June 23 to 27) is a bottoming pattern, and it developed against the post-SVB range highs near 1830. On a momentum basis, /RTY is clearly lacking. Nevertheless, the charts may be offering an important tell that, if the laggard of 2Q ’23 is able to find some footing, then the leaders may be able to resume their march higher.

Christopher Vecchio, CFA, tastylive’s head of futures and forex, has been trading for nearly 20 years. He has consulted with multi-national 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.

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.

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