S&P 500, SPX, NASDAQ 100, NDX – OUTLOOK:
- While the uptrend stays intact, US equities have but to clear previous their current highs.
- Better-than-expected earnings have supplied a flooring to equities.
- What is the outlook for the S&P 500 index and Nasdaq 100 index?
Recommended by Manish Jaradi
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US equities have struggled to clear previous their current highs even because the US Federal Reserve hinted at a pause within the mountaineering cycle. As the earnings season attracts to an in depth, banking sector issues seem like taking heart stage, posing a threat to the multi-week uptrend. On technical charts nevertheless, there are not any indicators of reversal of the bullish construction.
As of Thursday, 417 out of 500 corporations have reported Q1 earnings within the S&P 500 index, and outcomes have crushed expectations, offering a flooring for equities. So far, 69% of corporations within the S&P 500 have reported gross sales shock, whereas 78% have reported earnings shock, in keeping with Bloomberg knowledge. The strong earnings season is being overshadowed by the widening banking sector stress.
PacWest Bancorp shares plunged after it confirmed it was exploring strategic choices, together with a sale. Western Alliance Bancorp fell sharply earlier than recouping some losses after it denied experiences that it’s exploring a possible sale. Last week, regulators seized the troubled First Republic Bank and JPMorgan Chase agreed to purchase a majority of its property.
S&P 500 Daily Chart
Chart Created by Manish Jaradi Using Tradingview
A possible fallout from the troubles within the monetary sector is that banks will tighten credit score, worsening the financial downturn. As a consequence, the market now expects the Fed to chop by 75 foundation factors by the top of this yr – a view that most likely displays monetary circumstances have tightened an excessive amount of and too quick, and that the Fed could must reverse a number of the tightening.
For equity markets, the important thing query is to what extent is the tightening priced, which clearly will be difficult. In this regard, the Fed’s quarterly Senior Loan Officer Survey on financial institution lending (due on Monday) and CPI report (due on Wednesday) will probably be carefully watched. If these experiences level to the necessity for additional price hikes, then equities may begin to really feel the ache.
So far, on technical charts, there are not any indicators of a reversal of the uptrend, despite the fact that the rally seems to have stalled in current weeks. For extra dialogue, see “S&P 500 and Nasdaq Weekly Forecast: Climbing the Wall of Worry”, printed April 29.
S&P 500 Daily Chart
Chart Created by Manish Jaradi Using Tradingview
Note: In the above colour-coded chart, Blue candles symbolize a Bullish part. Red candles symbolize a Bearish part. Grey candles function Consolidation phases (inside a Bullish or a Bearish part), however typically they have a tendency to kind on the finish of a development. Note: Candle colours aren’t predictive – they merely state what the present development is. Indeed, the candle colour can change within the subsequent bar. False patterns can happen across the 200-period shifting common, round a help/resistance, and/or in a sideways/uneven market. The creator doesn’t assure the accuracy of the knowledge. Past efficiency will not be indicative of future efficiency. Users of the knowledge accomplish that at their very own threat.
S&P 500: Approaching key help
From a development perspective, the S&P 500 index bullish construction is undamaged — first highlighted in January (see “S&P 500 and Nasdaq 100 Index Technical Outlook: Turning Bullish”, printed January 28. Most not too long ago, the S&P 500 index’s failure to rise towards the higher fringe of a rising channel from the top of 2022 and the February excessive of 4195 will be interpreted as an indication of fatigue.
The index is now testing fast help on the end-April low of 4050. Any break under would set off a minor double prime (the mid-April and the early-May highs), opening the best way towards the decrease fringe of the channel (now at about 3925). Having mentioned that, solely a break under the March low of 3809 would disrupt the higher-top-higher-bottom sequence from the top of 2022.As lengthy as 4050 stays holds, the index may try to check the August excessive of 4325.
Nasdaq 100 Daily Chart
Chart Created by Manish Jaradi Using Tradingview
Note: In the above colour-coded chart, Blue candles symbolize a Bullish part. Red candles symbolize a Bearish part. Grey candles function Consolidation phases (inside a Bullish or a Bearish part), however typically they have a tendency to kind on the finish of a development. Note: Candle colours aren’t predictive – they merely state what the present development is. Indeed, the candle colour can change within the subsequent bar. False patterns can happen across the 200-period shifting common, round a help/resistance, and/or in a sideways/uneven market. The creator doesn’t assure the accuracy of the knowledge. Past efficiency will not be indicative of future efficiency. Users of the knowledge accomplish that at their very own threat.
Nasdaq 100: Rally stalls at key resistance
Likewise, the Nasdaq 100 index’s development has been up. The index has been flirting with key resistance on the early-April excessive of 13205. As talked about within the earlier replace, so long as the index stays above fast help on the April 25 low of 12725, a retest the August excessive of 13720 is probably going.
Nasdaq 100 Daily Chart
Chart Created by Manish Jaradi Using Tradingview
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