S&P 500, Nasdaq Surge While FTSE Lags Behind

Weekly Indices Forecast (SPX, NDX, FTSE)

• Bullish S&P 500: Early signs of consolidation and a quiet week could slow the advance but momentum very much in favour of a bullish continuation
• Bullish Nasdaq: Tech stocks respond well to lower US yields, USD
• Bullish FTSE 100: Energy stocks weigh on the index but bullish move yet to be invalidated

S&P 500 Weekly Forecast: Bullish

The bias heading into next week was a close call between ‘neutral’ and ‘bullish’. Arguments in favour of a neutral stance would point to recent price consolidation and the RSI on the cusp of oversold territory. Also, next week’s FOMC minutes could reveal further attention being placed on tighter financial conditions and a more balanced outlook concerning the risks of doing too little and too much in the fight to bring down inflation.

Weaker US data including Tuesday’s CPI data – which revealed more progress in inflation (headline and core measures) – has released some more steam out of the US dollar, adding to the risk on sentiment in equities.

With markets now almost entirely focused on rate cuts in 2024, next week’s quiet schedule is likely to favour the prevailing narrative of deteriorating data and rate cuts in 2024, contradicting the ‘higher for longer’ position held by the Fed.

Positive momentum could see price action testing 4540 next week with the yearly high of 4607 the next level of interest. There is a risk that next week could be one of introspection as markets digest the recent advance which could promote some profit taking and a calmer trading week, especially if the RSI heads into overbought territory. Support comes in at 4450.

S&P 500 Daily Chart

Source: TradingView, prepared by Richard Snow

Nasdaq 100 Weekly Forecast: Bullish

Financial conditions are essentially easing as US bond yields have fallen just shy of 60 bps on the 10-year and 41 bps on the 2-year, accompanied by rising equity markets. Risk sentiment has therefore turned very bullish and has been buoyed by weaker incoming data.

The Nasdaq has made multiple gaps higher, rising well above prior resistance at 15,285, now about to test the yearly high of 15,932. The index has just closed out a third straight week of gains and the yearly high will pose a decent challenge for the current bullish momentum. Support lies at 15,285 once again as the RSI nears overbought territory.

Nasdaq 100 Daily Chart

Source: TradingView, prepared by Richard Snow

Markets have moved very quickly to price in nearly 100 basis points worth of rate cuts in 2024. That is double what the Fed anticipates according to the latest Fed dot plot readings showing a drop of just 50 bps in comparison.

Fed Funds Futures’ Implied Interest Rate Probabilities

Source: Refinitiv, prepared by Richard Snow

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FTSE 100 Weekly Forecast: Bullish

The FTSE 100 has risen off the recent swing low but its rise is miniscule compared to high-flying US indices. That is in part due to the energy sector being weighed down by lower oil prices and a general lack of tech stocks which tend to exhibit a sensitivity to easing interest rate expectations.

The FTSE ended the week on a strong footing, rising just over 1.2% on Friday, surpassing 7504 and entertaining a move towards the 200-day simple moving average (SMA) and 7640. The UK Autumn Statement is due to be released by Chancellor Jeremy Hunt, alongside forecasts from the Office for Budget Responsibility (OBR) on Wednesday. This of course, could provide some volatility to the index and the pound sterling but apart from this, economic data for the week remains very light. Support lies at 7420 and even 7305.

FTSE 100 Daily Chart

Source: TradingView, prepared by Richard Snow

The FTSE has struggled to advance to the same degree as US indices due to the energy sector weighing on the bourse amid falling oil prices. Advances in other prominent sectors like financials and materials (miners) did show progress this week but posted low single digit gains as a whole.

FTSE 100 Weekly Performance by Sector (13 Nov – 17 Nov)

Source: Refinitiv, Daily FX

— Written by Richard Snow for DailyFX.com

Contact and follow Richard on Twitter: @RichardSnowFX