The fundamental background has been solid: Despite trading at high multiples to their EPS, Stock components of the indices have shown more than tenacious results and earnings growth.
Supplemented by the ongoing AI Boom that started the rally after the 2022 bear market, Equities are discarding the effect of tariffs (which don't seem to be scaring markets too much anymore), not even counting the pricing of rate cuts, while Participants are increasingly unfazed by the words of the Trump Administration.
With not many bearish catalysts allowing a real correction in Equities, it would be interesting to see if anything can stop the U.S. indices.
The answers could be in the past: Too heavy leverage and positioning combined with degrading economic data.
We are not in this territory just yet, but after the August 1st NFP report, it is never wrong to be cautious.
In the meantime, as traders our job is to look in the present, so let's have a look at both the S&P 500 and Nasdaq to spot where the indices are and where they could be going
The NFP Retracement that marked lows at 6,216 allowed the overbought levels to correct back to neutral making the ongoing rally sound.
One thing that bulls will have to be cautious about is the formation of potential bearish divergence with the previous cooldown in momentum, but before any short-term top gets found, it is still not here.
Nonetheless, the current course of action is decisively bullish with no bear cnadles closing below the prior bull bar, leaving buyers in immediate control.
For immediate bull/bear strength on the daily picture, keep an eye on the 20-Day MA that served as support throughout the entire rally – Currently at 6,359
Markets will still expect the PPI and Retail Sales data releases in tomorrow and Friday's sessions, respectively which may still have an impact on the current strong pricing of a September cut.
The 2-session rally has been more than strong, but some profit-taking is currently ongoing marking intermediate highs at 6,484.
Overbought RSI on the 1H timeframe combined with some key fibonnaci extensions from NFP lows have brought some selling, particularly as it combines with the middle of the upwards Channel from may, seen on the daily chart.
The price action stays bullish but the immediate correction may look to retest the 50-H MA, currently at 6,420 inside the Pivot Zone.
Levels of interest to place on your S&P 500 charts:
Resistance Levels
- 6,484 current daily highs and ATH
- ATH resistance zone between 6,475 to 6,845
- Potential resistance at 6,539 (1.382 Fib extension)
Support Levels
- End-July Top now Pivot 6,420 to 6,430 (confluence with 1H MA 50)
- Main support 6,340 +/- 5pts
- NFP Lows Mini-Support 43,250
- 43,000 Main Support Zone
The picture is very similar for the Nasdaq, except that its even sharper rebound already took it to a test of the higher bound of its Daily ascending Channel.
The daily session for the NQ is more mixed due to the technical resistance, but the story is the same as for the Spoose.
Momentum is very strong and except for any major surprise in upcoming data, the path should be to the upside as participants seem to discard the tariffs and Trump policies.
Do keep in mind that the top of the channel may bring some consolidation/profit-taking.
Buyers will have to monitor the potential formation of a bearish divergence with the same aspect as the S&P 500.
Once again, the picture is pretty similar to the S&P 500 except for the CPI rally taking the index to the top of its ascending channel.
It will be key to see the weekly close for future action but for now, momentum is cooling back down to neutral after topping in overbought levels.
Resistance Levels
- Top of Ascending Channel and Daily resistance 24,000 to 24,100
- Daily highs and ATH 23,986
- Potential resistance at 6,539 (1.382 Fib extension)
Support Levels
- 23,732 NFP highs, current Pivot Zone (confluence with 1H MA 50)
- 23,500 Support
- 23,150 Main Support Zone
