Indices Update

Are indices heading back to their all time highs? After an 8% drop in the NASDAQ100 and a 5% decline in the S&P500 and DAX40, the rebound is strengthening, courtesy of re-emerging hopes of Fed rate cuts. As it stands, the Fed funds market expects between 1 and 2 rate cuts, starting likely in September. 

Technically, Nasdaq100 faces trendine resistance at 18100. If broken, little comes in the way before the 18200,which denotes the limit of the April 2nd gap. SPX faces its own trendline resistance at 5200 and its April 2nd GapDown equivalent of 5229. Eurostoxx also faces trendline resistance at 5000, which coincides with a horizontal resistance aroumd 5010/15.

Finally, DAX40, stands out from its Eurostoxx50 cousin as it breaks through an important resistance of 18200. At this juncture, the only remaining visible resistance is at 18345-50, coinciding with the 76.4% retracement of the decline from the 18567 high to the 17633 low. 

What yields tell us? The sharp drop in US 10 year yields has helped indices, particularly tech stocks. With 10 yr currently at 4.46%, there is little support between now and 4.38%, where the 55-DMA starts. But I view the 4.25%-30% region as the more likely destination of support—confluence of the Dec trendline support, the 200-DMA and 100-DMA. Thus, if yields post further declines, more upside lays ahead for indices. 

All eyes turn to the next US CPI figures on May 15. Until then, yields may well act as a trigger for fresh gains in indices.