The S&P 500 is up 2.26% for the month so far
- The S&P 500 enters the week having rallied 17 of the past 21 weeks.
- The Nasdaq 100 is just days removed from all-time highs and may be consolidating in an ascending triangle.
- The technical evidence needed to suggest that a top has been carved out in U.S. equity indexes was never achieved.
The last time we checked in on U.S. equity index technical indicators it appeared investors were about to carve out the tops.
But we concluded that “the moment has not arrived yet.” Since that commentary on Friday, March 15, U.S. equity markets have turned higher, with both the S&P 500 (/ESM4) and Nasdaq 100 (/NQM4) charging to fresh record highs. In what has been a familiar refrain around these technical notes in recent months, bulls remain in control.
/ES S&P 500 price technical analysis: daily chart (September 2023 to March 2024)
Just over a week ago, the S&P 500 rebounded at critical support in the form of the uptrend from the October 2023 and February 2024 swing lows as well as the daily 21-day EMA (one-month moving average).
As noted at the time, “in a bull market, you buy at support,” and the rebound from said support reinforces the notion that the bull market is still very much intact. The recent swing high near 5140 may prove near-term support this week; below, the daily 21-day EMA comes in at 5209.50. The limited volatility profile for /ESM4 (IV Index: 12.8%; IV Rank: 10.9) suggests that long ATM call spreads are more appropriate than short ATM put spreads for expressing a bullish bias.
/NQ Nasdaq 100 price technical analysis: daily chart (September 2023 to March 2024)
Price action in the Nasdaq 100 over the past month has ultimately produced a sideways range, potentially serving as a correction in time rather than price.
If so, the uptrend from the October 2023 and March 2024 lows may be morphing into an ascending triangle; contextually, this is a continuation pattern that suggests new all-time highs may emerge soon. The 700-point range suggests a target near 19400.
Momentum is now bullish: with /NQM4 above its daily 5-, 13-, and 21-day EMA cloud, which is in bullish sequential order. Slow stochastics are in overbought territory; and the moving average convergence/divergence (MACD) is trending higher above its signal line. The limited volatility profile for /NQM4 (IV index: 17.5%; IV rank: 19.2) suggests that long ATM call spreads are more appropriate than short ATM put spreads for expressing a bullish bias.
/RTY Russell 2000 price technical analysis: daily chart (September 2023 to March 2024)
In the prior update, we observed that “a move above 2090 next week would negate the burgeoning bearish breakout.”
Indeed, the Russell 2000 was able to clear this hurdle, resetting the technical chart to an ascending triangle with another test of resistance. While it has thus far not succeeded, there is no such thing as a “quintuple top”; the more often resistance (or support) is tested, the more likely it is to break. The relatively robust volatility profile for /RTYM4 (IV index: 20.8%; IV rank: 42) suggests that short ATM put spreads are more appropriate than long ATM call spreads for expressing a bullish bias.
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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