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Tops May Be Forming in the S&P 500, Nasdaq 100

By:Christopher Vecchio - CFA

Market update: The S&P 500 up 0.34% for the month so far

  • The S&P 500 closed the week flat, and the Nasdaq 100 was off almost 1% while the Russell 2000 dropped almost 2%.

  • It was the second-worst week of the year for the Nasdaq 100 and Russell 2000 which, alongside S&P 500 is losing uptrends from the October 2023 and February 2024 swing lows.

  • More–but not much more–technical evidence is needed to suggest that a top has been carved out in U.S. equity indexes.

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

Persistently hotter than expected inflation data, a turn higher in commodity prices, and a jump in U.S. Treasury yields proved too much for U.S. equity markets to overcome is the calendar turned through the ides of March.

The second-worst week of the year for the Nasdaq 100 (/NQM4) and Russell 2000 (/RTYM4), and the third-worst week of 2024 for the S&P 500 (/ESM4), has produced the first viable technical evidence--at least on a weekly closing basis: Which U.S. equity markets are setting up for a more significant correction?

It's been 86 trading days since /ESM4 has experienced a correction of -2% or more away from a swing high during the uptrend. For all those saying that a correction is overdue, this may finally be the moment!

And yet, the moment has not arrived yet. It may be close, but there are more technical hurdles to clear before we can say with a greater degree of confidence that one of the greatest bull market rallies in U.S. history is coming.

With rate decisions coming from the Bank of Japan (Tuesday), Reserve Bank of Australia (Tuesday), Federal Reserve (Wednesday), and Bank of England (Thursday) next week, traders may not need to wait long for clarification.

/ES S&P 500 price technical analysis: Daily Chart (September 2023 to March 2024)

The S&P 500 (/ESM4) is at support. The uptrend from October 2023 and February 2024 swing lows as well as the daily 21-day exponential moving average (EMA), also called a one-month moving average.

&P 500 (/ESM4)

In a bull market, you buy at support. That said, a move below this week’s swing low of 5157 would clear both the uptrend and the monthly EMA, indicating a 100.25-point top may have been carved out; this would suggest a measured move down to 5056.75 as an initial target in any correction.

The bottom line: If you’ve been a bull for the past few months, 5157 is the line in the sand before it’s time to take your ball and go home for the near future.

/NQ Nasdaq 100 Price technical analysis: daily chart(September 2023 to March 2024)

The Nasdaq 100 (/NQM4) may have the most daunting chart, as one could make two bearish cases:

  • A broadening wedge at the highs, which is a topping pattern (not pictured); or

  • A bearish rising wedge, which is a significant reversal pattern (pictured below).

Nasdaq 100 (/NQM4)

The loss of the uptrend from the October 2023 and February 2024 swing lows is significant, as it the close below the daily 21-day exponential moving average (EMA). The behavior of the momentum indicators is changing, too.

Slow stochastics have moved to their lowest point since the first week of the year. From the first week of the year, slow stochastics moved below their median line just onceahead of Nvidia (NVDA) earningswhich was quickly negated. 17606.50, the low formed ahead of NVDA earnings, would be the first target lower. A move above 18350 early next week would indicate a false bearish breakdown.

/RTY Russell 2000 price technical analysis: Daily chart (September 2023 to March 2024)

The Russell 2000 (/RTYM4) was plagued by banks this week,. That is, perhaps, coincidence now that the Fed’s Bank Term Funding Program (BTFP) liquidity facility ended on March 11.


Nevertheless, the trappings of a double top are clear, as is the failed breakout of an ascending triangle pattern that now appears to be favoring a downside move: /RTYM4 is now below both the uptrend from the October 2023 and February 2024 lows as well as its daily 21-day EMA (sound familiar?).

More meaningful support may become prevalent at the most recent swing low of 2007. A move above 2090 next week would negate the burgeoning bearish breakout.

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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