Record Levels Remain in Focus

Nasdaq 100, S&P 500 Outlook:

  • The Nasdaq 100 pressed to new heights on Tuesday before pulling back slightly on news of an FTC review into some of the index’s largest tech members
  • Similarly, the S&P 500 waded into uncharted territory and will look to prior resistance as support moving forward
  • Elsewhere, copper and crude oil have begun a modest rebound which could suggest the initial economic shock of the virus has passed

Nasdaq 100 Forecast

The tech heavy Nasdaq 100 pressed to new heights on Tuesday as Fed Chairman Jerome Powell spoke on monetary policy and the economy. In his remarks, Chairman Powell downplayed the impact of the coronavirus on the US economy while affirming bill purchases will continue into the end of the second quarter.

In response, the US Dollar wilted, and stocks were bolstered until it was announced the Federal Trade Commission ordered Facebook, Amazon and Google to turn over evidence for a merger review – a theme that could provide uncertainty for the Nasdaq in the weeks ahead.

Nasdaq 100 Price Chart: 2 – Hour Time Frame (January 2020 – February 2020)

How to Trade the Nasdaq 100

Nevertheless, the immediate response was muted, and the threat could be cast aside altogether until more progress is made and potential reparations – if any – are made known. Consequently, the Nasdaq may remain tied to coronavirus fears and broader risk sentiment. In the meantime, the Nasdaq will look to hold above prior resistance – now turned support – around 9,450. Resistance should now reside around 9,600, the index’s new all-time high.

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S&P 500 Forecast

The technical landscape for the S&P 500 is very similar to that of the Nasdaq 100 with sparse resistance and a plethora of potential support. Regardless, it seems as though equities are tilted higher for the time being as risk appetite appears robust and new highs are established.

S&P 500 Price Chart: 4 – Hour Time Frame (October 2019 – February 2020)

S&P 500 price chart

How to Trade the S&P 500

Still, depressed commodity prices and an inverted yield curve reveal some investors are concerned about the adverse economic impact of the coronavirus and have begun to adjust prices accordingly. Therefore, new stock market heights make it seem as though the threat to the S&P 500 and Nasdaq 100 has been almost completely dismissed – if not for the brief retracement in late January. While suggesting a reversal is in store as stocks trade at all-time highs is rather presumptuous, the divergent price action across assets that typically share some degree of positive correlation is concerning.

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To that end, a reconciliation between crude oil, copper and US equities may occur – a possibility that might see stocks stall or retreat slightly while crude and copper rebound. To be sure, the coronavirus threat is still at large and could erode risk sentiment at any time if bad news is delivered which could hamstring all three markets. In the meantime, follow @PeterHanksFX on Twitter for updates and analysis as the S&P 500 looks to hold above confluent support around 3,337.

–Written by Peter Hanks, Junior Analyst for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

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