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Did NVDA and AI Save the S&P 500 and Nasdaq 100?

By:Christopher Vecchio - CFA

The markets have resumed their march toward all-time highs after the chip maker’s resounding earnings beat

  • U.S. stock markets have quickly resumed their march toward all-time highs after Nvidia’s resounding earnings beat.
  • Both the S&P 500 (/ESH4) and Nasdaq 100 (/NQH4) have reclaimed their uptrends from the October 2023 and January 2024 swing lows, warding off a significant technical breakdown.
  • The Russell 2000 (/RTYH4) remains within the parameters of a symmetrical triangle, which is underpinning directionless price action.

Week-to-date price percent change chart for /ES, /NQ, /RTY, /YM
Week-to-date price percent change chart for /ES, /NQ, /RTY, /YM

Market update: S&P 500 up 4.25% month-to-date

The charts were looking bleak yesterday, with the S&P 500 (/ESH4) testing multi-month uptrend support and the Nasdaq 100 (/NQH4) already showing signs of breaking down. Anxiety over today’s Nvidia (NVDA) earnings report was running high.

Those concerns were alleviated following NVDA’s blowout quarter; the stock is at fresh all-time highs. /ESH4 and /NQH4 have followed suit, warding off more meaningful technical breakdowns that would have likely accelerated against the backdrop of an unfriendly seasonality backdrop for the second half of February.

Instead, NVDA saved the uptrends, with /ESH4 hitting a fresh all-time high and /NQH4 erasing all of its losses since Friday. With measures of volatility crashing back to earth (the cash VIX is off more than -1 point), bulls are firmly back into the driver’s seat.

/ES S&P 500 Price Technical Analysis: Daily Chart (June 2023 to February 2024)

/ES S&P 500 Price Technical Analysis: Daily Chart (June 2023 to February 2024)

Yesterday we expressed concern that “the bulls are on the precipice of losing control.” That precipice was never crossed, with the S&P 500 (/ESH4) finding support at the uptrend from the October 2023 and January 2024 swing lows as well as its daily 21-EMA (one-month moving average). Furthermore, in setting a new all-time high, /ESH4 has eliminated the possibility of a double top.

Bullish momentum has reasserted itself quickly.

/ESH4 is above its daily 5-, 13- and 21-EMA envelope, which is in bullish sequential order. Slow stochastics have issued a bullish crossover and are nearing a return into overbought territory, while MACD (moving average convergence/divergence) is on the cusp of issuing a bullish crossover while above its signal line. Channel resistance comes in closer to 5150 through the end of the month, giving ample room to the upside for immediate continuation higher.

/NQ Nasdaq 100 Price Technical Analysis: Daily Chart (June 2023 to February 2024)

/ES S&P 500 Price Technical Analysis: Daily Chart (June 2023 to February 2024)

Yesterday’s bearish contingency planning proved unnecessary, given that “a move back above the trendline from the October 2023 and January 2024 lows would negate the increasing bearish momentum setup,” which is exactly what has transpired in the wake of NVDA’s burst higher. The Nasdaq 100 (/NQH4) has reclaimed its uptrend, contextualizing recent price action as a potential bull flag within the confines of a broader uptrend.

Likewise, the downtrend from the February intramonth swing highs has started to break. After struggling more relative to /ESH4, /NQH4 may play catchup on the back of renewed confidence in the AI narrative in the short-term; new all-time highs are not far away.

/RTY Russell 2000 Price Technical Analysis: Daily Chart (July 2023 to February 2024)


Unlike the significant developments in /ESH4 and /NQH4, the price action in the Russell 2000 (/RTYH4) has not been meaningfully influenced by NVDA. Instead, the lack of enthusiasm reinforces the change in perspective offered yesterday, when it was noted that “a broader symmetrical triangle may be forming since December 2023, which intimates that rangebound price action may be in the cards for the next several weeks.

Contextually, support near 1900 and resistance near 2100 would appear stable for the foreseeable future … directionless strategies like short strangles or iron condors may prove viable.” This remains the case.

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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