Open account
☰
Open account
✖

Nasdaq, S&P 500 surge after failing to print fresh lows, long setups eyed

Article By: ,  Market Analyst
September 12, 2024 1:35 AM
  • US stock futures reversed big early losses on Wednesday, led by tech
  • Rather than fundamental factors, the move looks to have been technically driven
  • S&P 500, Nadsaq 100 break above known levels, presenting bullish setups for traders

Do not adjust your screens

A lot of traders in Asia must have wondered whether they were still dreaming when they woke up and saw the huge gains on the S&P 500 and Nasdaq 100 on Wednesday, reversing a big opening plunge sparked by a hotter-than-expected US CPI report for August.

There were all kinds of fundamental narratives being pitched in the media and in market chat groups I’m part of, but none provided a definitive answer as to what exactly sparked the reversal. From my perspective, the uptick inflation does has positive readthroughs for revenue growth, especially if accompanied by evidence of firm demand as we’ve seen recently. But yeah, nah. I’m not even buying that.

Rather than anything fundamental, once glance at S&P 500 and Nasdaq 100 futures suggests the move may have been technically driven, sparked by an inability to break through lows set earlier in the month.

Nasdaq 100 surges after testing 200DMA

Let’s start with Nasdaq 100 E-minis which, like they did a session earlier, attracted decent buying from the 200-day moving average given the lift in trading volumes. With the price managing to break through minor horizontal resistance at 19200, it presents a decent long setup, especially with the bullish breakout in RSI (14) seemingly about to be confirmed by MACD which is also turning higher.

Traders could buy around these levels with a stop below 19200 targeting the 50-day moving average and downtrend running from the record highs set in July. If those levels were to be breached, you could start thinking about a potential push to 20026.75 or 20371 which are the next known levels on the topside.

If the price were to reverse back below 19200, traders could potentially flip the trade around, selling beneath the figure with a stop above for protection. The initial target would be the 200-day moving average with 18387 the next after that.

S&P 500 dip buyers are lurking below

Turning to S&P 500 E-minis, Wednesday’s reversal came after yet another failed attempt beneath 5490, as had been seen the session earlier after the price failed to extend Friday’s rout to start the trading week. Like the Nasdaq, the lift in volumes accompanying the move suggests there were plenty willing to buy the dip. The inability to break through 5396.75 signals the path of least resistance may be higher in the near-term.

Having successfully cleared the 50-day moving average on Wednesday, traders can now use this to build trade setups around. As seen during periods earlier this year, the moving average is often tested but broken far less frequently.

Now that the price has closed above, those considering longs could buy around here or wait for a possible pullback to the 50-day, allowing for entry with a stop below for protection. Above, the price did a lot of work either side of 5584.75 in July and August, making that a key level to overcome to make the trade work from a risk-reward perspective. If it can, 5665.25 is a known level with the record highs at 5721.50 the next after that.

Unlike Nasdaq 100 futures, momentum indicators are yet to turn bullish, but they look like soon may. RSI (14) is set to test its downtrend while MACD is starting to flick higher towards the signal line.

If the price is unable to hold the 50-day moving average, the bullish setup would be negated, allowing for traders to consider setting up for a short targeting 5396.75.

-- Written by David Scutt

Follow David on Twitter @scutty

 

How to trade with City Index

You can trade with City Index by following these four easy steps:

  1. Open an account, or log in if you’re already a customer 

    • Open an account in the UK
    • Open an account in Australia
    • Open an account in Singapore

  2. Search for the market you want to trade in our award-winning platform 
  3. Choose your position and size, and your stop and limit levels 
  4. Place the trade

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

© City Index 2024