S&P 500, Nasdaq 100 Ranges Prevail After Triple Witching
Choppy, rangebound conditions may prevail for the foreseeable future, putting into focus strategies like iron condors or short strangles
- Triple witching on Friday led to a sharp pullback in stocks, but technical damage was minimal.
- Both /ESZ3 and /NQZ3 are trading in ranges carved out through the summer months.
- /RTYZ3 remains on softer footing, struggling to rebound from critical support.
Monday could be the least consequential day of a remarkably busy week, with no major earnings releases or U.S. economic data.
Price action is reflecting the sentiment that no immediate catalysts warrant little by way of directional movement in the four major U.S. equity index futures. Of course, that very well may change in the coming days, as a bevy of inflation reports and central bank meetings from around the world offer potent catalysts for traders to reassess their positioning.
/ES S&P 500 price technical analysis: daily chart (September 2022 to September 2023)
/ESZ3 continues to funnel into a triangle that has formed from the March and August swing lows and the July and August swing highs. If the interpretation is correct, then a breakout—bullish or bearish—may be around the corner. Momentum is flat otherwise. /ESZ3’s daily 5-, 13-, and 21-day exponential moving average (EMA) envelope is in neither bearish nor bullish sequential order. Moving average convergence/divergence (MACD) is hugging its signal line, and slow stochastics are back to their median line. As noted last week, “choppy, rangebound conditions may prevail for the foreseeable future, putting into focus strategies like iron condors or short strangles (despite low IV not offering much premium for traders to collect).”
/NQ Nasdaq 100 price technical analysis: daily chart (December 2022 to September 2023)
/NQZ3 remains nestled in its multi-month range, and like /ESZ3, momentum appears neutral at present time. MACD is flatlining at its signal line, while slow stochastics are back to their median line. /NQZ3 is now below its daily EMA envelope, but the EMA envelope is in neither bearish nor bullish sequential order. The outlook remains that “directionally neutral, risk-defined strategies may prove most suitable in the near-term.”
/RTY Russell 2000 price technical analysis: daily chart (April 2023 to September 2023)
Over the course of a week where there hasn’t been much significant technical development, that’s not necessarily good news for /RTYZ3. While the index is holding above the critical 1820/50 swing zone, /RTYZ3 is below its moving averages and the daily EMA envelope is in bearish sequential order.
MACD is trending lower while below its signal line, and slow stochastics are back in oversold territory. Therefore, nothing has changed: “for bears to truly gain control henceforth, a break below the 1820/50 area—which has been critical support and resistance dating back to the onset of the regional banking crisis in March—is necessary.”
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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