S&P 500, Nasdaq 100 – Talking Points
- S&P 500 finds support around 3,700; key fib resistance ahead
- Nasdaq 100 bounces sharply as gap fill becomes possibility near-term
- Fed Chair Powell delivers remarks on Capitol Hill
Equities continue to erase sharp overnight losses as Fed Chair Jerome Powell speaks on Capitol Hill on the state of monetary policy. In his preprepared remarks, Powell indicated that the American economy remains strong and also is positioned to absorb tighter monetary policy. The Chairman also stated that additional rate hikes remain appropriate, and the pace of said rate hikes will depend on incoming data and the everchanging economic outlook.
Risk has bounced sharply since Powell’s remarks began, as Treasury yields across the curve have come in sharply. The 2-year yield fell to 3.07% while the 10-year yield traded down to 3.14%. Market participants may look to the bid in bonds as a potential warning sign for this rally, given the precarious nature of risk in the current climate. Given the broader bear market context, it would appear that we remain in a “sell the rip” environment.
US Treasury Yields (Maturities Greater Than 1 Year)
Courtesy of TradingView
S&P 500 futures (ES) bounced sharply premarket from the 3700 zone, ultimately coming within touching distance of a key Fib level at 3800. 3802 represents the 61.8 retracement of the advance off the March lows to all-time highs back in January, and this level was a key downside target on the initial probe lower earlier this month. This area may prove to be key resistance for ES in the near-term, as risk faces a significant uphill battle to reclaim higher prices. Elevated inflation, tighter monetary policy and recession fears will continue to present significant challenges in the near-term. Should any tests of the 3800 area fail, traders may look to 3720 and 3655 as potential areas to re-enter longs.
S&P 500 1 Hour Chart
Chart created with TradingView
Nasdaq 100 futures (NQ) also tremendously benefitted from lower US Treasury yields, offering some respite for the bloodied and bruised index. Tech has been put through the woodchipper in 2022, with many frothy growth names receiving massive haircuts to price and valuation multiples. As the era of ZIRP (zero interest rate policy) fades away, speculative growth names with no tangible earnings look set to continue to lag broader markets. However, this pop following the long weekend in the US sees NQ coming within touching distance of a gap above 11800 from earlier this month. Price may look to fill this gap before ultimately resuming the broader trend lower. Near-term support may be found at 11300, but should that fail then traders may look for fresh yearly lows below 11000.
Nasdaq 100 1 Hour Chart
Chart created with TradingView
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— Written by Brendan Fagan, Intern
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