By:Christopher Vecchio, CFA
A disjointed trading week thanks to the Thanksgiving holiday isn’t standing in the way of U.S. equity markets continuing to find new yearly or all-time highs
- The S&P 500 cash equity index (SPX) traded to a new all-time high today, while S&P 500 futures (/ESZ4) has flirted with levels that would represent a new all-time closing high.
- The Russell 2000 (/RTYZ4) is proving strongest today, outperforming the Nasdaq 100 (/NQZ4) by over +1.5%.
On the other side of the holiday, seasonality through the end of the year supports continued gains in equity markets.
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Market Update: S&P 500 up +4.64% month-to-date
A disjointed trading week thanks to the Thanksgiving holiday isn’t standing in the way of U.S. equity markets continuing to find new yearly or all-time highs. Rotation continues and breadth is improving with the Russell 2000 (/RTYZ4) surging over +2% today. Similarly, the equal-weighted S&P 500 and Nasdaq 100 are outperforming their market cap-weighted counterparts. Trading volumes are likewise healthy, at or above their one-month moving averages.
The moves today could be characterized as a relief rally of sorts, with the news of Scott Bessent being picked as the next Secretary of the Treasury giving traders confidence that financial markets are in steady hands. Volatility has come down in recent sessions, with the spot VIX back to 15 from a high of 18.79 last Wednesday. A setup similar to that in 2022 and 2023 is coming together: positive seasonality through the holiday period, coupled with a falloff in volatility, may yield melt-up trading conditions.
/ES S&P 500 Price Technical Analysis: Daily Chart (May to November 2024)
The S&P 500 (/ESZ4) has retraced a healthy portion of its gains today, although is retaining its gap open from the start of the week. The cash index (SPX) traded to a new all-time high, for context. De-risking ahead of the holiday shouldn’t come as a surprise, but the chart setups remain bullish otherwise.
/ESZ4 is trading above its daily 5-EMA, daily 21-EMA, and daily 34-EMA; the EMAs are in bullish sequential order. Slow Stochastics are trending higher towards overbought territory, and MACD is on the verge of issuing a bullish crossover while above its signal line. Volatility has contracted (IVR: 13.7) after the early-month jump, and the VIX has slid back to 15.
Our longstanding view has been if the S&P 500 were to break above 5670…an inverse head and shoulders pattern, or a symmetrical triangle, breakout would be in the cards. The measured move higher, depending upon measurement points, would call for [the S&P 500] to trade above 6100, and perhaps as 6300, into the end of the year. If the breakout were to transpire alongside a drop in the VIX below 15, it would be suitable to express bullishness through ATM calls (or call spreads). This view remains valid.
/NQ Nasdaq 100 Price Technical Analysis: Daily Chart (May to November 2024)
While the continuous Nasdaq 100 futures contract ($/NQ) has traded to and through all-time highs this month, the December futures contract (/NQZ4) has struggled to define a bullish breakout. Taking a step back, it appears that an ascending triangle has been forming over the past six months, with resistance coming in around 21,250. Contextually, this has formed amid an uptrend, thus it should be seen as a bullish continuation pattern as long as the uptrend from the August, September, and November swing lows remains intact. Otherwise, the momentum profile for /NQZ4 is a mirror image of /ESZ4: intraday weakness today has not yet nullified what remains a bullish setup.
/RTY Russell 2000 Price Technical Analysis: Daily Chart (June to November 2024)
The Russell 2000 (/RTYZ4) has hit fresh yearly highs with today’s price action. After a bullish breakout from its symmetrical triangle in the wake of the election, /RTYZ4 quickly retraced its gains but did so in a textbook technical manner: returning to breakout resistance, only to treat it as support and a springboard before the next leg higher. The measured move in /RTYZ4’s symmetrical triangle calls for a rally above 2600 over the coming weeks.
Christopher Vecchio, CFA, tastylive’s head of futures and forex, has been trading for nearly 20 years. He has consulted with multinational firms on FX hedging and lectured at Duke Law School on FX derivatives. Vecchio searches for high-convexity opportunities at the crossroads of macroeconomics and global politics. He hostsFutures Power HourMonday-Friday andLet Me Explainon Tuesdays, and co-hostsOvertime,Monday-Thursday.@cvecchiofx
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