S&P 500, Nasdaq 100 - Talking Points
- S&P 500 bounces slightly but stalls below key resistance
- Nasdaq 100 outperforms as bulls defend 12100
- Traders digest the possibility of a 100 basis point hike next week
Equities are posting a modest rebound from Tuesday’s decapitation, with the Nasdaq 100 leading US benchmarks higher. Equities posted their worst day on the year Tuesday following a hotter-than-expected CPI print. In fact, Tuesday’s session was the worst for all three major benchmarks since June 2020.
As a result of yesterday’s CPI print, market expectations for next week’s FOMC meeting have changed dramatically. The prospect of a 50 basis point (bps) hike has effectively disappeared, as traders have instead started to focus on the possibility of the Fed raising by a whopping 100 bps. Treasury yields soared due to this “recalibration” on Tuesday, with the 2-year Treasury yield jumping by as much as 22 basis points. That advance has cooled today, with the 2-year up by just 2 bps.
Nasdaq 100 futures (NQ) are perky following the opening bell despite some choppy conditions. Price gyrated significantly following this morning’s PPI release, as bulls successfully defended multiple attacks on the 12100 area. Price has since bounced firmly above 12200, as traders come to grips with revised expectations for Federal Reserve tightening. The jump in US Treasury yields yesterday hammered high multiple stocks, and further increases across the yield curve into next week’s FOMC meeting could continue to weigh on NQ. As long as support near 12100 holds, bulls may remain in control and we may continue to retrace Tuesday’s decline.
Nasdaq 100 Futures 1 Hour Chart
Chart created with TradingView
Unlike NQ, S&P 500 futures (ES) were able to break the Tuesday lows following PPI. Just as was the case in the final hour of trade yesterday, the slip into the 3940 range was bought up. Price remains penned in by fib resistance at 3983, which is the 50% retracement of the advance off the June lows. Failure here may open the door to further weakness into next week’s FOMC, as traders question the possibility of a full 100 basis point hike. I would look to the 3900 area for support should additional weakness materialize, which is the 38.2% retrace of that same advance off the June lows.
S&P 500 Futures 1 Hour Chart
Chart created with TradingView
Trade Smarter - Sign up for the DailyFX Newsletter
Receive timely and compelling market commentary from the DailyFX team
Resources for Forex Traders
Whether you are a new or experienced trader, we have several resources available to help you; indicator for trackingtrader sentiment, quarterlytrading forecasts, analytical and educationalwebinarsheld daily,trading guidesto help you improve trading performance, and one specifically for those who arenew to forex.
--- Written by Brendan Fagan
To contact Brendan, use the comments section below or@BrendanFaganFXon Twitter
