S&P 500, Nasdaq Reach Fresh Yearly Highs as Disinflation Takes Hold

S&P 500, Nasdaq 100 News and Analysis

Inflation Confirmation Hits the US Dollar Hard, Lifting Equities

The May inflation print revealed the first time core inflation had dipped below the prior sticky range of between 5.4% – 5.7%, printing at 5.3%. However, if appears markets have received greater confirmation of the disinflationary trend in the US when June’s core CPI data printed below the consensus forecast of 5%, eventually coming in at 4.8%. The headline measure as well as PPI – which came out ahead of the US open today – have been trending steadily lower for some time now.

S&P 500 Technical Levels to Consider

The S&P 500 (E-mini futures chart) suggests a higher open today, with the flagship US index on track to test the zone of resistance around 4528 (the 78.6% retracement of the 2022 major decline) and 4550. Pullbacks in the index have been hard to come by however there have been two separate weeks where prices ended lower. Bullish momentum followed on from the declines, as bulls saw improved entry points to rejoin the upward trend.

S&P 500 Weekly Chart

Source: TradingView, prepared by Richard Snow

The daily chart helps identify the fresh yearly high as prices edged higher yesterday only to close below 4510. Today however, the futures market sees 4550 as the next level of resistance with 4585 and 4630 next on the radar. Levels of support become tricky given the steady increase but the swing low of 4411 is the most relevant level to keep an eye on. The RSI is inches away from re-entering overbought territory for those anticipating pullbacks anytime soon.

S&P 500 Daily Chart

Source: TradingView, prepared by Richard Snow

Nasdaq 100 Technical Levels of Interest

The tech heavy Nasdaq – which has led the US equities race this year – is nearing a full retracement of the major 2022 decline. What’s more impressive is that this run has taken place in a year where interest rates have continued to rise, although admittedly at a slower pace, boosted by a handful of mega cap stocks and AI players.

On the weekly Nasdaq futures chart, the market appears motivated to reclaim all of the lost ground in 2022, as a move above 15,260 and the 78.6% Fibonacci retracement of the 2022 decline has ensued. Weekly momentum appears strong having remained in overbought territory since the end of May. The uptrend remains in place as prices remain contained within the ascending channel.

Nasdaq 100 Weekly Chart

Source: TradingView, prepared by Richard Snow

The daily chart, it is clear to see the move above what might have been considered a double top had prices not rallied higher. The September level of 15,710 is next up as resistance with 16,260 providing an indication of near-term bullish fatigue. The index is moments away form overbought status heading into next week’s start to tech earnings as Tesla and Netflix kick things off after the major banks.

Nasdaq 100 Daily Chart

Source: TradingView, prepared by Richard Snow

— Written by Richard Snow for DailyFX.com

Contact and follow Richard on Twitter: @RichardSnowFX