S&P 500, Nasdaq 100 Push down session declines, as Fed Chairman Powell testifies

S&P 500, Nasdaq 100 – Talking Points

  • The S&P 500 finds support around 3,700; key fiber resistance ahead
  • Nasdaq 100 jumps sharply as hole filling becomes an option in the short term
  • Fed Chair Powell comments on Capitol Hill

Shares continue to erase sharp losses overnight, while Fed Chairman Jerome Powell speaks on Capitol Hill about the state of monetary policy. In his prepared remarks, Powell indicated that the U.S. economy remains strong and is also positioned to absorb a tighter monetary policy. The President also stated that further rate hikes remain appropriate and the pace of these rate hikes will depend on incoming data and the ever-changing economic outlook.

The risk has risen sharply since Powell’s remarks began, as government interest rates have come in sharply across the curve. The 2-year interest rate fell to 3.07%, while the 10-year interest rate fell to 3.14%. Market participants may see the offer of bonds as a potential warning sign of this recovery, given the precarious nature of the risk in the current climate. Given the broader bear market context, it seems that we remain in a “sell the rip” environment.

US Treasury Yields (maturities greater than 1 year)

S&P 500, Nasdaq 100 Push down session declines, as Fed Chair Powell testifies

Lent by TradingView

The S&P 500 futures (ES) jumped sharply from the pre-market from the 3700 zone, eventually coming within touching distance of an important Fib level of 3800. 3802 represents 61.8 retracement of the progress from the March lows to all-time highs back in January, and this level was an important downside target on the initial probe lower earlier in the month. This area may prove to be a major opposition for ES in the short term as risk faces a significant uphill battle to regain higher prices. Higher inflation, tighter monetary policy and fears of recession will continue to pose significant challenges in the short term. If any testing of the 3800 area fails, traders may look to 3720 and 3655 as potential areas to re-enter the longs.

S&P 500 1-hour chart

S&P 500, Nasdaq 100 Push down session declines, as Fed Chair Powell testifies

Chart created with TradingView

The Nasdaq 100 futures (NQ) also benefited enormously from lower US government bonds, giving the bloody and battered index respite. Technology has been put through the wood chipper in 2022, where many frothy growth names have received massive cuts to price and valuation multiples. As the ZIRP (zero interest rate) era disappears, speculative growth names with no tangible earnings appear to continue to lag behind wider markets. However, this pop after the long weekend in the US sees NQ come within touching distance to a hole above 11,800 from earlier in the month. The price may appear to fill this gap before eventually resuming the broader trend lower. Short-term support can be found at 11,300, but if that fails, traders can look for new annual lows below 11,000.

Nasdaq 100 1-hour chart

S&P 500, Nasdaq 100 Push down session declines, as Fed Chair Powell testifies

Chart created with TradingView

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— Written by Brendan Fagan, intern

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