S&P 500 and Nasdaq 100 – Fundamental Forecasts and Analysis
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Most Read: S&P 500, Nasdaq 100 Price Action – Pushing Higher Against Market Wisdom
The US stock market opened Friday in negative territory, continuing Thursday’s heavy sell-off. The ongoing move lower is being fueled by higher US Treasury yields and a stronger US dollar. This week a number of Fed speakers have been giving their updated views on inflation and the future path of interest rates and they have all been on the hawkish side. This hawkishness is being priced into markets on an ongoing basis, pushing bond yields to multi-month highs and the closely watched terminal rate to around 5.30% from mid-4s at the height of peak optimism recently.
Next week the US economic calendar has a few important data points that traders need to focus on. The FOMC minutes will give us more background on where policymakers are on interest rates, while Friday’s core PCE release, the Fed’s prefeed measure of inflation, may add a boost of volatility across a range of markets. Traders should also be aware that the NYSE, Nasdaq, and the US Bond Markets are all closed on Monday 20th in observance of Presidents’ Day.
For all market-moving events and data releases, see the real-time DailyFX Economic Calendar
The S&P 500 has given back all of this week’s early gains and looks like it is setting up a re-test of 4,000 in the short term. Support from the 50-day moving average may not be enough to hold a concerted push lower, leaving the way for a test of the 200-dma at 3,950 likely. We still have a medium-term pattern of higher lows in place which may steady any further sell-off.
S&P 500 Futures (ES1!) Price Chart – February 17, 2023
S&P Retail Sentiment Turns Bearish
| Change in | Longs | Shorts | OI |
| Daily | 4% | -8% | -1% |
| Weekly | 35% | -20% | 5% |
Retail trade data show 45.68% of traders are net-long with the ratio of traders short to long at 1.19 to 1.The number of traders net-long is 3.66% higher than yesterday and 2.18% higher from last week, while the number of traders net-short is 2.95% lower than yesterday and 1.73% higher from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests US 500 prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current US 500 price trend may soon reverse lower despite the fact traders remain net-short.
The Nasdaq 100 is sitting in the middle of a short-term bull flag formation which may provide some support over the next few days. The worry is that this bull flag may soon turn into a bearish channel, allowing the market to move lower. Recent support at 12,250 is set to be tested before 12,000, and then the 200-dma at 11,958 come into focus.
Nasdaq 100 Futures (NQ1!) Daily Price Chart – February 17, 2023
What is your view on the S&P 500 and the Nasdaq 100 – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.
