S&P 500 and Nasdaq 100 squeeze session bottoms as Fed Chair Powell testifies -by Ecork

S&P 500, Nasdaq 100 – Talking Points

  • S&P 500 finds support around 3700; The key to resistance is to trust in the future
  • Nasdaq 100 rebounds sharply as closing the gap becomes a possibility in the near term
  • Fed Chair Powell delivers remarks on Capitol Hill

Stocks continue to erase sharp losses overnight as Federal Reserve Chairman Jerome Powell speaks on Capitol Hill about the state of monetary policy. Powell, in his prepared remarks, noted that the US economy remains strong, and is also in a position to absorb a tighter monetary policy. The Chairman also stated that additional increases in interest rates remain appropriate, and the pace of these hikes will depend on incoming data and the ever-changing economic outlook.

Risks have rebounded sharply since Powell’s comments began, with Treasury yields coming across the curve sharply. The 2-year bond yield fell to 3.07% while the 10-year bond yield fell to 3.14%. Market participants may view bond giving as a potential warning sign for such a rally, given the precarious nature of the risks in the current climate. Looking at the context of the broader bear market, it appears that we are still in a “rip sell” environment.

US Treasury yields (maturities greater than one year)

Courtesy of TradingView

S&P 500 (ES) futures rebounded sharply ahead of the market from the 3700 area, eventually coming within close range of the key Fibonacci level at 3800. The 3802 represents the 61.8 retracement of the advance from March lows to all-time highs in January, and that was The level was a major downside target in the lower initial investigation earlier this month. This area may prove to be a major resistance for ES in the near term, as the risks face a huge uphill battle to regain the price rally. High inflation, tight monetary policy and fears of recession will continue to pose significant challenges in the near term. If any tests of the 3800 area fail, traders may look at 3720 and 3655 as potential areas to re-enter long positions.

S&P 500 1-hour chart

S &  P 500, Nasdaq 100 Pressing Session Bottoms As Fed Chair Powell Testifies

Chart created with TradingView

Nasdaq 100 (NQ) futures also benefited significantly from lower US Treasury yields, providing some relief for the bloody and bruised index. The technology was put through the woodchipper in 2022, with many frothy growth names receiving massive haircuts for price and valuation multiples. As the era of ZIRP (Zero Interest Rate Policy) fades, it appears that speculative growth names that do not have tangible profits will continue to lag in the broader markets. However, this pop after a long weekend in the US sees NQ close to a gap above 11800 from earlier this month. The price may look to fill this gap before finally resuming the broader bearish trend. Near term support can be found at 11300, but if that fails, traders may look for fresh annual lows below 11000.

Nasdaq 100 hourly chart

S &  P 500, Nasdaq 100 Pressing Session Bottoms As Fed Chair Powell Testifies

Chart created with TradingView

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— written by Brendan Fagan, Trainee

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