Market update: US indices ahead of Powell; S&P 500 and Nasdaq price setups

US equity indices will be looking for cues from Federal Reserve Bank Chair Jerome Powell, who is scheduled to speak later Thursday. That’s because, over the past couple of weeks, there has been a distinct shift in Fed rhetoric, even from some of the hawkish members. Several Fed officials have indicated a pause in hiking interest rates given the tightening in financial conditions because of the surge in Treasury yields.

Minutes of the September FOMC meeting outlined the case for proceeding carefully in determining the extent of additional tightening, noting that participants generally judged that risks had become more two-sided. Pricing for the Fed terminal rate has reduced following the recent comments from the central bank’s officials.

Markets have been grappling with a mix of factors, including mounting tensions in the Middle East, elevated US yields, third-quarter earnings season, light equities positioning, and generally positive seasonality. Participants will be looking for a justification of the dovish market pricing from Powell’s tone and comments.

S&P 500 240-minute chart

S&P 500: capped at vital resistance

On technical charts, the S&P 500 index has pulled back from key converged resistance on the 200-period moving average, the upper edge of the Ichimoku cloud on the 240-minute charts, and the 89-day moving average. While the price action is still unfolding, the recent price action raises the odds that the near-term trend is at best sideways, as highlighted in the previous update.

The index has been nicely guided lower by a declining channel since July, with the cloud structure also changing in recent months, as highlighted in late September. It is now testing a key cushion at Friday’s low of 4377. Any break below could pave the way toward the early October low of 4215. Any break below the 200-day moving average could expose the downside initially toward the end-April low of 4050.

S&P 500 daily chart

Zooming out from a multi-week perspective, the weakness since August reinforces the broader fatigue, as pointed out in previous stated.

Nasdaq 100: channel resistance holds

The Nasdaq 100 index has retreated from a stiff hurdle on the upper edge of a declining channel since July, not too far from the early-September high of 15,618 and the July high of 15,932. While the price action is still unfolding, the lower high created last week raises the risk of a retest of the September low of 14,435. This support is crucial as any break below would disrupt the higher-highs-higher-lows sequence established since the start of the year.

The momentum on the monthly charts has been feeble compared with the huge rally since late 2022, raising the risk of a gradual weakening, similar to the gradual drift lower in gold since May.

Nasdaq 100 daily chart

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