S&P 500 Momentum Report

Jackson Hole Symposium, Fed minutes in focus

The dust around recession fears has settled across global markets for now, as market participants continue to ride on optimism that the Federal Reserve (Fed) may start to ease rates as soon as next month to further support a soft-landing scenario. A 25 basis point (bp) cut in September has been fully priced by markets, but rate expectations are split between having another 25 bp cut or a larger 50 bp cut in November.

With that, eyes will be on Fed Chair Jerome Powell’s speech at Jackson Hole this week to offer any clarity. While he may lay the groundwork for the rate-cutting cycle to commence next month as per his guidance in the July Fed meeting, he may still retain some degree of data-dependence and may likely refrain from giving a hard commitment for the scale of cuts ahead. This is to give the Fed some policy flexibility, given that we still have several key inflation releases (Personal Consumption Expenditures (PCE), Consumer Price Index (CPI)) and the crucial non-farm payroll report over coming weeks in the lead-up to the September meeting.

S&P 500: Eyeing for fresh record high

Appetite for risk-taking has been robust, as the bullish momentum in S&P 500 extends its winning streak to the eighth straight day. The 10% bounce since its low on 5 August 2024 leaves the index just 1.2% away from its all-time high at the 5,674 level, with a retest looking imminent for buyers. Any break to a fresh record high could reinforce the prevailing upward trend and leave the 6,000 psychological level on watch.

The recent market retracement has offered a reset for previous overbought technical conditions, which now stands at more neutral territory. Despite the stellar gains over the past two weeks, the CNN Fear and Greed is still in “fear” territory as well, which allows room for risk sentiments to recover further.

Levels:

R2: 6,000
R1: 5,674

S1: 5,452
S2: 5,279

Source: IG charts

Nasdaq 100: Traction resumes following bounce off 200-day MA

The Nasdaq 100 index has recovered close to 15% from its recent low on 5 August 2024, as a strong defending of its 200-day moving average (MA) and a key upward trendline kept the bullish bias intact. Similarly to the S&P 500, its daily relative strength index (RSI) has crossed back above its mid-line as a sign of buyers in control, while its daily moving average convergence/divergence (MACD) eyes for a crossover into positive territory.

The psychological 20,000 level may be on watch next. Any move above it may pave the way to retest its all-time high at the 20,760 level, while a temporary breather ahead could leave the 18,920 level on watch as near-term support to hold.

Levels:

R2: 20,760
R1: 20,000

S1: 18,920
S2: 17,300

Sector performance

Sector performance over the past week reflected broad-based gains across all 11 S&P 500 sectors, with the technology and consumer discretionary sectors pulling ahead from the rest. Weaker US Treasury yields may play a part with imminent Fed’s easing, while traction towards semiconductors and megacap tech stocks resumed amid the pushback against recession fears. The improved risk environment marks a stark reversal from investors’ defensive stance just a month ago, where we still see defensive sectors (utilities, consumer staples, healthcare) outperforming on a one-month basis. Thus far, the recovery in megacap tech stocks has been phenomenal, notably with Nvidia up 19.2%, Tesla up 12.8% and Amazon up 6.9% over the past week. At the bottom of the table, the energy sector managed to eke out a slight 0.8% gain despite falling oil prices, offering yet another validation to the strong market risk appetite.

Source: Refinitiv

Source: Refinitiv

Source: Refinitiv
*Note: The data is from 13th – 19th August 2024.

Source: Refinitiv
*Note: The data is from 13th – 19th August 2024.

Source: Refinitiv
*Note: The data is from 13th – 19th August 2024.