S&P 500, Nasdaq 100 Near All-Time Highs Ahead of Inflation, FOMC
S&P 500, Nasdaq 100 Near All-Time Highs Ahead of Inflation, FOMC
Big tests ahead for the stock market include May U.S. inflation data and the June Federal Reserve interest rate decision on June 12
Both the S&P 500 and Nasdaq 100 saw fresh monthly, yearly, and all-time highs.
The jump in Treasury yields did no favors for the Russell 2000, however, which is on weaker technical footing heading into next week.
Now that the May U.S. jobs report is out of the way, attention turns to the May U.S. inflation report and Federal Reserve rate decision on June 12.
U.S. equity markets are off to a solid start in June, despite the sixth month of the year being a weak link in the chain of otherwise strong seasonal performance.
This week, with markets on tilt thanks to the latest episode of the GameStop (GME) rollercoaster, traders shrugged off mixed economic data that highlighted a normalizing, but still strong jobs market, with signs of wages staying firm and business activity accelerating.
The big tests are still ahead: the May U.S. inflation rate will be released on Wednesday morning, with the June Federal Reserve rate decision later that afternoon. As is often the case when the calendar stacks as such, traders tend to keep powder dry until the event risk subsides; Monday and Tuesday next week, absent another GME flareup, could very well be quiet.
If Wednesday, June 12 is a decisive day for markets, it's worth noting that equity indexes are offering diverging views. While both the S&P 500 (/ESM4) and Nasdaq 100 (/NQM4) hit fresh all-time highs earlier today, the Russell 2000 (/RTYM4) dipped into negative territory year-to-date.
Bulls and bears have setups to try and capitalize upon in the immediate future.
/ES S&P 500 price technical analysis: daily chart (October 2023 to June 2024)
The drop in the S&P 500 around the May U.S. jobs report saw prices decline into the area around 5333.50 before rebounding, former yearly highs established at the start of April.
Even though the daily candlestick is a doji, a sign of indecision, bulls remain in control after the failed attempt to drop below the former yearly low. Momentum has improved in recent days, with slow stochastics back into overbought territory and moving average convergence/divergence (MACD) issuing a bullish crossover.
For trend traders, the low volatility (IVR: 3.2) suggests that long at the money (ATM) call spreads is an appropriate way to express a bullish bias as long as the post-nonfarm payrolls report (NFP) low of 5329 holds; below, there is a case for a short-term top having been established.
/NQ Nasdaq 100 price technical analysis: daily chart (October 2023 to June 2024)
Like in S&P 500, the Nasdaq 100 has carved out a doji candle to close out the week, perhaps a sign of a breather after a solid >+2% gain to start June.
A breather makes sense contextually as well, with the pre-Federal Open Market Committee (FOMC) trading days usually producing lighter volumes. The measured move outside of the 17100-18700 range calls for a target of 20300, which could be achieved before the end of July without /NQM4 breaching the uptrend in place since the October 2023 low.
Relatively low volatility (IVR: 8.3) suggests that long 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)
The Russell 2000 has been rangebound for the better part of the past six months, failing to scale above 2175 or below 1925 in any meaningful capacity.
Momentum is negative, perhaps pointing to a return to the rising trendline from the October 2023 and April 2024 lows near 2000 in the coming sessions. However, instead of taking a directional approach, trading around the range may be prudent: volatility is higher in /RTYM4 (IVR: 30.8) than in either /ESM4 or /NQM4, 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
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.
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.