US indices look set for monthly gains despite banking crisis

With two full trading sessions left to go, the S&P 500 is up 1.45% for March and 4.9% for the quarter. The Nasdaq is up 6.68% in March and 17.4% for the quarter, on track for its best quarterly performance since 2020. Even the laggard, the Dow Jones, is back to flat on the month and down just 1.3% for the year.

The astounding performance of the tech-heavy Nasdaq further proves the point we made in last week's "How US stock indices have gained despite banking crisis" here. As interest rate markets flipped from expecting rate hikes to expecting rate cuts, there has been a tailwind supporting tech giants, including Apple, Microsoft, Google, Meta, Amazon and Nvidia.

As the conversation shifts from "which bank goes next?" to "what comes next?" it's worth keeping in mind investor money has been flowing away from equities into money markets, including $238bn in the past fortnight alone, which could come back into stocks if no new banking dramas emerge.

The second supportive consideration is the month of April is seasonally the fourth best month of the year for US stock markets, with an average return of 1.78% for the S&P 500 over the past ten years.

The final consideration could prove to see a tailwind switch to a headwind for tech stocks. If the economy proves more resilient than expected, inflation will stay sticky, and if there is little evidence of a credit crunch, it won't be long before expectations of rate cuts swing back towards tightening.

S&P 500 technical analysis

The S&P 500 is eyeing the neckline/resistance at 4070ish of a wonky inverted head and shoulders.

Should the S&P 500 see a sustained break above 4070/80, we think it would likely trigger a more robust recovery towards 4200 - the top of its 15-week 4200/3800 range.

Conversely, if the S&P 500 fails to break above resistance at 4070/80, allow for a retest of the support coming from the 200-day moving average at 3945.

S&P 500 daily chart

Nasdaq technical analysis

As outlined above, expectations of interest rate cuts have supported tech stocks and helped the Nasdaq extend its rally away from the support coming from the 200-day MA at 11,970.

Providing that the Nasdaq holds above support 11970/11,800, we continue to expect the rally from the October lows to continue higher towards the August 13,740 high.

A sustained close back below support 11970/11800 would negate the positive bias.

Nasdaq daily chart

Dow Jones technical analysis

The Dow Jones broke back above the 200-day MA this week at 32,363 negates the previous bearish bias and allows a more constructive view to emerge.

Providing the Dow Jones above the 200-day MA at 32,363 and above the recent 31,429 low, a weak positive bias is in place, looking for a push towards the March high at 33,383.

Dow Jones daily chart