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S&P 500, Nasdaq 100 Outlook: Bears Attack Yearly Lows

By Justin Mcqueen

12:06, 11 October 2022

Stock Exchange Graph: Source GettyImages

S&P 500 | Attacking Yearly Lows

Familiar price action with global equities on the back foot as bond yields continue to edge higher. As I mentioned last week, the misplaced view that market participants were riding on the hope of a possible central bank pivot, did leave equity markets at risk of another bear market rally. Consequently, the subsequent US data, namely the most recent NFP report dented the view that the Federal Reserve would ease up on tightening policy aggressively. That being said, the main economic data to watch this week, will be the upcoming US CPI report where it does feel that market participants are gearing up for a higher-than-expected figure. I say this on the basis that in the lead to the CPI report, the USD has continued to go from strength to strength, bond yields are nearing recent highs, albeit exacerbated by UK bond yields and US equities are testing yearly lows. 

US CPI Expectations

CPI Y/Y 8.1% (Expected), 8.3% (Previous)
Core CPI Y/Y 6.5% (Expected) 6.3% (Previous)

How will CPI affect the US Dollar and Treasuries?

Key Support Underpins Yet Again

Once again the S&P 500 has been held up by the 200WMA (3595), which has acted as key support since the start of the quarter. At the same time, this morning’s headlines out of Russia, in which Foreign Minister Lavrov stated that Russia would mull over a potential Biden-Putin if proposed by the US has slightly eased some of the negative sentiment today, albeit marginal at best. As I have said previously, the bias remains for rallies to be faded, however, there appears to be little appetite to increase bearish exposure around the yearly lows prior to the release of the US CPI report on Thursday.

DE40

16,424.90 Price
-0.090% 1D Chg, %
Long position overnight fee -0.0220%
Short position overnight fee -0.0002%
Overnight fee time 22:00 (UTC)
Spread 1.5

HK50

16,341.20 Price
-1.900% 1D Chg, %
Long position overnight fee -0.0261%
Short position overnight fee 0.0042%
Overnight fee time 22:00 (UTC)
Spread 30.0

US30

36,160.60 Price
-0.080% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0040%
Overnight fee time 22:00 (UTC)
Spread 2.2

US100

15,773.00 Price
-0.360% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0040%
Overnight fee time 22:00 (UTC)
Spread 1.8

Should the index post a closing break below its 200 week moving average, the risk would be for a move towards 3500 (Aug 2020 high), which protects the pre-covid peak at 3395. Meanwhile, on the topside, near-term resistance resides at 3800 (last week's highs) 

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S&P 500 Chart: Weekly Time Frame

S&P 500 Chart – Photo: Capital.com, Source: Tradingview

Nasdaq 100 | Bearish Momentum Temporarily Slowing

While the Nasdaq 100 posted its lowest close since July 2020, bearish momentum in the tech-heavy index has become slightly exhausted as the RSI has failed to make a lower low. Now, this does not suggest that the outlook is no longer bearish, to me it still remains the case that it is, particularly with global bond yields accelerating higher. However, an argument can be made for a possible reprieve in the short run, which would ultimately depend on the outcome of the US CPI report.  

Nasdaq 100 Chart: Daily Time Frame

Nasdaq 100 Chart – Photo: Capital.com, Source: Tradingview

Markets in this article

US500
US 500
4559.3 USD
-7.8 -0.170%
US100
US Tech 100
15773.0 USD
-56.2 -0.360%

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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