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S&P 500, Nasdaq 100 – Talking Points
- S&P 500 trades down to 50 SMA overnight before bouncing
- Nasdaq 100 futures gap lower as rising wedge takes shape
- Markets continue to price in hawkish Fed following Powell’s speech
US equity markets look poised to kick off the trading week deep in negative territory, as futures markets pushed lower during the overnight session. Weakness continues to be driven by Federal Reserve Chair Jerome Powell’s comments on Friday, where he reaffirmed his commitment to returning inflation to target even if there is pain for US households and businesses. The Friday speech saw a nosedive in risk assets, with the S&P 500 falling more than 150 points while the Nasdaq 100 tumbled nearly 600 points. Markets have been reminded that the Fed will remain aggressive in its battle against inflation, as some complacency had creeped in following the recent CPI and PCE prints. Hopeful bets of a potential “pivot” in 2023 have been slashed following Chair Powell’s remarks.
With US Treasury yields rising across the curve, equity valuations were put under severe pressure during Friday’s session. The economically-sensitive “blue-chip” Dow Jones fell more than 3%, the benchmark’s worst session since May. The S&P 500 fell 3.4% on Friday, as failed to break above 4200 in the runup to Chair Powell’s remarks. Friday was a bloodbath for a US equity market that had been holding up quite well in the face of mounting headwinds. The market had broadly shrugged off poor economic data and growing concerns about global growth, and was roughly trading flat in August following a robust July rally.
With selling having continued in the futures market following the closing bell Friday, S&P 500 futures closed right at support around 4042 before gapping lower on the Sunday futures open. Selling has eased somewhat, but price remains penned in by prior support at 4042. With this level now acting as resistance, price may look lower after retracing much of the Sunday gap. Support may be found around the 4000 zone, as the combination psychological support and the 50-day moving average at 4005 may prop price up and prevent a serious flush lower.
S&P 500 Futures (ES) 1 Hour Chart
Chart created with TradingView
Unlike S&P 500 futures, Nasdaq 100 futures were unable to close the Sunday gap during overnight trading. Price action into the open sees NQ down roughly 1% ahead of the opening bell, as price remains coiled in a tight range. NQ appears to be forming a rising wedge pattern, which may hint at lower prices ahead. Any momentum to the upside may also stall at the 50-day moving average, which sits overhead at 12508. If a downside break does materialize, price may find support around the 12300 region. With technical resistance overhead and rising Treasury yields weighing on the valuations of these high-multiple stocks, the outlook remains extremely cloudy for NQ.
Nasdaq 100 Futures (NQ) 1 Hour Chart
Chart created with TradingView
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— Written by Brendan Fagan
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