S&P 500, Nasdaq 100 Positive for the Week as Consolidations Persist

Market update: The S&P 500 is down 1.07% for the month so far

• The S&P 500 (/ESM4) has rallied more than 1% off its daily low.
• Meanwhile, the Nasdaq 100 (/NQM4) has traded above its pre-CPI high and is now in positive territory for the week. 
• The technical evidence to suggest stocks have topped just hasn't materialized yet. 

U.S. equity markets have had a rocky start to April, typically one of the better months of the year (which is to say nothing about how well April turns out after the bull run we’ve seen since the October 2023 low).

Given the circumstances, however, there are signs that technical support is holding up and the volatility spike is being weathered: both the S&P 500 (/ESM4) and Nasdaq 100 (/NQM4) have rebounded back into positive territory for the week.

Efforts by bears (thus far) have failed, leaving intact bullish trend support and consolidations that have materialized in recent weeks. 

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

The area around 5160/80, former highs in February and swing lows in March, has proven itself as support for the S&P 500 (/ESM4) thus far through April. The same is true for the daily 21- and 34-day exponential moving average (EMA) envelopes, which have defined the trend support of the rally since the October 2023 low.

Taking a step back, /ESM4 has been trading sideways for the past month. A breach of the downtrend from the intramonth April swing highs (above 5270 this week) would suggest a return to all-time highs. A drop below 5160/80 would suggest a head and shoulders topping pattern, with a measured move (~160 points) calling for a drop back towards 5000/20. Until either occurrence, however, there’s little reason to take directional bets. 

/NQ Nasdaq 100 price technical analysis: daily chart (October 2023 to April 2024) 

In late March, we observed “price action in the Nasdaq 100 (/NQM4) over the past month has ultimately produced a sideways range, potentially serving as a correction in ‘time’ rather than ‘price.’” Nothing has changed: the 18000/700 range remains in place.

The range may entice some traders to capitalize on the elevated volatility environment (IVR: 31.6) by initiating short strangles or iron condors. But as is the case with /ESM4, /NQM4 is sitting close to the midpoint of the range, so there’s no reason to place a directional bet: bulls have the upper hand above 18700; bears are in control below 18000. 

/RTY Russell 2000 price technical analysis: daily chart (October 2023 to April 2024) 

The Russell 2000 (/RTYM4) once again takes the title of "ugliest technicals."

A bearish rising wedge may be starting to unfold, although a familiar area of support and resistance in recent months around 2000/40 has stemmed the sell-off this week.

Speaking of damage, while /ESM4 and /NQM4 have erased their weekly losses, /RTYM4 is still down by over -1%. That said, because of how high volatility is at present time (IVR: 56.5) and the fact that support has been found, it may prove prudent to look for opportunities to sell a put spread once more evidence of bottoming appears on lower-term (1 hour, 4 hour) periods. 

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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