S&P 500 & NASDAQ 100 OUTLOOK:
- The S&P 500 and Nasdaq 100 rise on the week, but bullish momentum begins to fade as yields trek higher
- The interest rate outlook remains in flux, but expectations have become less dovish in recent days relative to the middle of March
- The S&P 500 stalls at resistance and pivots lower heading into the weekend
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Most Read: S&P 500 Stalls at Cluster Resistance, Bearish Tech Setup in Play as Bulls Bail
The S&P 500 and Nasdaq 100 had a positive but unimpressive week, with the former rising 0.79% and the latter barely gaining 0.13% over the course of the past five trading sessions. Although both indices had staged a solid rally since the middle of last month, the bullish momentum seems to be fading as jitters about the Federal Reserve’s monetary policy path resurface, undermining confidence on Wall Street.
A few weeks ago, when the U.S. banking sector upheaval was in full swing, traders were quick to increase bets that the central bank would halt its tightening campaign imminently and begin to ease policy shortly thereafter. There is no doubt that the FOMC’s hiking cycle is coming to an end in short order, but it remains to be seen whether policymakers would move to cut borrowing costs soon after.
The interest rate outlook has been in flux, but has become less dovish in recent days relative to mid-March, especially after Friday, when major U.S. banks reported strong earnings and University of Michigan sentiment survey data showed a sharp rise in near-term inflation expectations. The implied yields on 2023 fed funds futures contracts displayed in the chart below reflect these new market dynamics.
If interest rate expectations become less dovish on a sustained basis, stocks will likely suffer and head lower at a rapid pace; after all, it was the possibility of multiple rate cuts in the second half of the year that boosted sentiment and kept markets buoyant since the middle of last month. For this reason, both the S&P 500 and Nasdaq 100 may remain in a vulnerable position and prone to losses in the near term.
of clients are net long. of clients are net short.
| Change in | Longs | Shorts | OI |
| Daily | -10% | 2% | -3% |
| Weekly | -1% | 6% | 3% |
S&P 500 TECHNICAL ANALYSIS
In terms of technical analysis, the S&P 500 pivoted lower heading into the weekend, after failing to breach cluster resistance in the 4,165-4,195 band, an area where the June 2022 and February 2023 highs converge with a medium-term rising trendline in play for the last six months. If market weakness intensifies in the coming days, initial support comes in at 4,075, followed by 4,040.
On the flip side, if the S&P 500 manages to resume its recovery, the first resistance to keep an eye on lies at 4,165-4,195. If this technical barrier is taken out, there would be scope for a bullish move towards the 4,310 level, which corresponds to the 61.8% Fibonacci retracement of the 2022 decline.
S&P 500 TECHNICAL CHART
S&P 500 Technical Chart Prepared Using TradingView