S&P 500, Nasdaq Continue Consolidation Near All-Time Highs
S&P 500, Nasdaq Continue Consolidation Near All-Time Highs
Plus, the first two weeks of July tend to produce the best returns for any two-week period of the year
- Each of the S&P 500 (/ESU4), Nasdaq 100 (/NQU4), and Russell 2000 (/RTYU4) have traded sideways over the past week.
- Federal Reserve interest rate cut odds are more-or-less stuck, with the first cut priced to arrive in September.
- The May U.S. PCE Index is likely to reinforce the narrative that inflation is making progress that would warrant easing.
Market update: S&P 500 up +4.60% month-to-date
U.S. equity markets are finishing off another strong month, having set numerous all-time highs throughout June. Robust earnings results for companies riding the AI narrative and the prospect of the start of the Federal Reserve interest rate cut cycle, as always 60-90 days away, have reinforced positive momentum. If July proves typical, bulls will remain on parade in the S&P 500 and Nasdaq 100. That’s because the first two weeks of July have produced the best returns for any two-week period of the year over the past 10 and 20 years, as well as all the way back to 1928. Meanwhile, declining volatility in the Russell 2000 may harken a move toward the upper half of the recent range.
/ES S&P 500 price technical analysis: Daily chart (October 2023 to June 2024)
The pullback in the S&P 500 (/ESU4) over the past week is fairly typical: since the lows in October 2022, whenever the S&P 500 has been more than 3% above its one-month moving average (daily 21-EMA), it has averaged a drop of 0.38% over the following week (n=30). The sideways chop since last Friday has seen former highs near 5515 hold as support. A correction in time instead of price may have transpired; the consolidation may be a bull flag, suggesting a move to all-time highs may be near: above 5560, all-time highs are the goal; below 5510; a drop into 5460 would be eyed over the coming sessions.
/NQ Nasdaq 100 price technical analysis: Daily chart (October 2023 to June 2024)
Like in /ESU4, the Nasdaq 100 (/NQU4) has been trading sideways over the past week. A 2.54% move down from high to low during the recent pullback, /NQU4 has reasserted itself back above its one-week moving average (daily 5-EMA), a hallmark of strong momentum that carried /NQU4 higher throughout May and June. The measured move to 20458 has not been achieved, and with volatility remaining low (IVR: 13.8), it thus remains that long at-the-money (ATM) call spreads are an appropriate way to express a bullish bias.
/RTY Russell 2000 price technical analysis: Daily chart (October 2023 to June 2024)
Nothing has changed for the Russell 2000 (/RTYU4) for weeks. It has failed to scale above 2175 or decline below 1925 in any meaningful capacity. As such, the approach remains appropriate volatility is higher in /RTYU4 (IVR: 25.4) than in either /ESU4 or /NQU4, making short strangles or iron condors bracketed around the six-month range highs and lows an appropriate strategy in the near-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
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