Nasdaq 100 and S&P 500 to Retest August Highs – A Question of When Not If?

S&P 500, SPX, NASDAQ 100, NDX – OUTLOOK:

• Bullish moves on the quarterly charts of the Nasdaq 100 and the S&P 500 index.
• Both indices are gearing up for a move toward their respective August highs.
• How is the trend evolving and what are the key levels to watch?

Gradually improving upward momentum in the Nasdaq 100 and the S&P 500 index raise the odds of a rise toward their respective August highs as the US Federal Reserve nears a pause in its rate-hiking cycle.

The S&P 500 and the Nasdaq 100 index’s rise in the January-March quarter above the high of the October-December quarter (on the quarterly charts for the first time since the downtrend began in 2022), has raised the odds that the worst could be over for US equities. Both indices remain in their respective bullish phases, first highlighted in January (see “S&P 500 and Nasdaq 100 Index Technical Outlook: Turning Bullish”, published January 28. Furthermore, the retreat in February-March was a consolidation within the bullish phase and not a reversal of the uptrend. See “S&P 500 and Nasdaq Outlook: Is Powell’s Testimony a Game Changer?”, published March 9.

Nasdaq 100 Daily Chart

Chart Created by Manish Jaradi Using Tradingview

Data published on Thursday showed US producer prices unexpectedly declined in February, solidifying the view that broader price pressures are cooling. This follows a subdued US CPI report on Wednesday and the dovish tone of the minutes of the FOMC meeting in March, boosting hopes that the Fed is nearing the end of its current tightening cycle. Markets are pricing in about a 34% chance that the Fed will pause at its May meeting, according to the CME’s FedWatch tool.

S&P 500 Daily Chart

Chart Created by Manish Jaradi Using Tradingview

Nasdaq 100: Headed toward the August high

As highlighted in the previous update, the Nasdaq 100 index’s break above the February high of 12880 has raised the odds of a retest of the August high of 13720. This follows a rebound at the end of 2022 from near the major floor on the 200-week moving average. The Moving Average Convergence Divergence (MACD) indicator crossover into positive territory on the weekly charts for the first time since early 2022 is a sign that the trend in the Nasdaq 100 index has changed.

Nasdaq 100 Quarterly Chart

Chart Created by Manish Jaradi Using Tradingview

Still, the index needs to break above the vital converged ceiling: the August high, the 89-week moving average, and the upper edge of the Ichimoku cloud on the weekly charts for the medium-term downward pressure to reverse.

Nasdaq 100 Weekly Chart

Chart Created by Manish Jaradi Using Tradingview

S&P 500: Guided by the uptrend channel

The S&P 500 index’s rise to a one-month high on Thursday further reaffirms the uptrend (see colour-coded candlestick charts based on trend/momentum indicators that indicate the index is in a bullish phase).As highlighted in the previous update, the break above the barrier at the early-March high of 4078 has raised the odds of a move toward the August high of 4325. Ahead of the August high, there is another hurdle at the February high of 4195.

S&P 500 Daily Chart

Chart Created by Manish Jaradi Using TradingView

— Written by Manish Jaradi, Strategist for DailyFX.com

— Contact and follow Jaradi on Twitter: @JaradiManish