US equities rebound after remarkable week: analysing S&P500 and Nasdaq

[MongiIG]

After a pivotal week, US equity indices look to build on gains in November. Thanks to softer economic data, and a subdued non-farm payroll report, which raised hopes of the Fed ending rate hikes for a soft landing.

 

Source: Bloomberg

 

Indices S&P 500 Federal Reserve Nasdaq United States Stock market

 Tony Sycamore | Market Analyst, Australia | Publication date: Monday 06 November 2023 05:27

What a difference a week makes.

At the start of last week, the concern was how deep the 2023 correction in US equity markets would extend, only for US equity markets to rebound and lock in their best week of the year.

The stunning rebound followed a string of equity and bond market-friendly news that included soft ISM data, lower treasury issuance, and a more balanced FOMC. All of this was topped off on Friday night by a soft non-farm payroll report, which raised hopes the Fed has ended its rate hiking cycle and is on track to deliver a soft landing.

Within the NFP details, the US economy added 150k jobs in October, falling from 336k in September. The unemployment rate increased to 3.9%, the highest since January 2022, and wage growth increased by 0.2% over the month, less than the 0.3% expected.

After what may well turn out to be the most important week of the final quarter of 2023, the rates market starts this week, pricing in a 25bp rate cut from the Fed in June and a total of 100bp of cuts in 2024. With little in the way of tier-one economic data this week, aside from the University of Michigan Sentiment Index, that is unlikely to change much in the short term.

S&P500 technical analysis

While the decline from the July 4634.509 high went deeper than expected, it is viewed as countertrend as it displays choppy corrective characteristics rather than impulsive ones. The close above the 200-day moving average at 4273 is a positive development.

However, before confirming the correction is over, we need to see the S&P500 break the sequence of lower lows and lower highs. This means we are waiting for a break/close above the October 4430 high to confirm the correction is complete and the uptrend has resumed.

S&P500 daily chart

 

Source: TradingView

Nasdaq technical analysis

In our previous updates, we noted the 14,200/14,000 layer of support as an important area for the Nasdaq to complete a correction from the July 16,062 high.

After holding and rebounding from the support mentioned above, the Nasdaq is within touching distance of trend channel resistance at 15,430, coming from the July 16,062 high reinforced by the October 15,468 high.

Should the Nasdaq see a sustained break above resistance at 15,430/70, it would open up a test of the 15,719 September high before the July 16,062 high. Aware that rejection from the 15,430/70 resistance zone may see a retest of support at 14,200/14,000.

Nasdaq daily chart

 

Source: TradingView

• _{Source Tradingview. The figures stated are as of 6 November 2023. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation}

 

 

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