The ES and NQ futures approach major psychological resistance. Treasury yields are unchanged ahead of a 10-year note auction, and equity markets will be paying close attention to more Fed Speak.
Chris Chavez, Market Strategist
[Auto Transcribed]
Good afternoon, traders. It’s Chris Chavez with the Blue Line Futures and it’s your daily midday market minute. The Nasdaq and the S&P trade up to new all time highs today. But before we get to it, if you’re watching this video like it, subscribe if you’re on our website, there’s also a link to direct you to YouTube. You can subscribe that way.
We would love for you to follow us. We would love for you to help us build our following. Is this the top in tech stocks we’re seeing, you know, a new all time high being hit when looking at the S&P and looking at the Nasdaq. And is the big rotation upon us now? We’ve seen coming into 2024 that many were talking about, you know, the rotation from growth to value or even growth to small caps.
And you’ve seen small caps and value really underperform as tech has remained in the spotlight. So is this the top? Well, we were certainly coming on to some significant psychological resistance and looking at the S&P testing that $5,000 or 5000 area mark. Futures actually got above that 5000 level here intraday and the spot index traded right up to about 4995 or so as of this video.
So a break at close above 5000 definitely looks pretty significant from a psychological perspective. That’s a major overhead line in the sand. But talking about some of the fundamentals, looking under the hood, you know, what’s moving this market, specifically, the magnificent Seven Mega-Cap tech stocks have been driving this, especially with these eye disruptors. And, you know, this new regime of AI and how it’s really just taken hold of the market as a whole.
So I think many are asking if this is the top or if you’re going to begin to see a rotation into small caps or into industrials or health care, some of the other areas inside of the economy. And I think the question remains, if we’re going to see a rotation, why would that be? And expectations have continued to be met, especially when looking at estimates earnings estimates for all of the mega-cap tech stocks that have really outperformed, they’ve continued to be met.
Many have still exceeded expectations. So I think that what would really shift this rotation or spark a rotation, rather, would be expectations starting to slow and starting to see companies potentially miss or even give poor guidance. Some large constituents, you know, Taiwan semi coming into this year gave very bullish guidance and that kind of did spark a bit of a lag when looking at Apple and Nvidia.
Now if we were to get Nvidia’s earnings here, you know, a month or so and India gives poor guidance that could really stall this tech rally and maybe you see a rotation. Other than that it could also be labor market weakness, economic weakness. You know, we will get initial and continuing claims tomorrow, but earnings expectations have continued to move higher and economic growth, GDP expectations have started to tick up a bit coming into the year.
We saw about a consensus estimate of 1.3% GDP growth, which has moved higher to 1.5. Many private companies, you know, Goldman and other other, you know, investment banks have put out even higher GDP growth estimates. So really, I think it would be a slowing consumer, weaker U.S. economy, weaker labor market. That could definitely decrease and reduce some of those expectations leading to a rotation or you start to see some, you know, poor guidance specifically from some of these mega-cap names that has fueled this rally.
And then you start to see a rotation spillover into some of these other areas. Other than that, it definitely seems like as of right now, you know, tech is going to continue to lead the way until something does shift a little bit. And when looking at interest rate expectations, there’s a 20% chance of a cut in March. Those have been widely reduced from 80 plus percent coming into the beginning of this year.
And the Fed fund futures are pricing in 112 basis points worth of cuts. So the markets have actually slowly started to price a little bit more cuts or layer in a little bit higher expectations of cuts this week, even though we haven’t really seen a tremendous amount of data, you’re looking about 100 basis points of cuts at the beginning of this week and started to see those tick up just slightly.
Remember, the Fed summary of economic projections is calling for 75 basis points worth of cuts. So market is still pricing in a bit more than the Fed this year. Will we see economic weakness? That’s going to be the big question today. We did get Atlanta Fed GDP now, which came in slightly below estimates, 3.4% versus 4.2%, and that is for Q1 of 2020 for we will get a ten year note auction today at 12 Central Standard Time.
Very important to pay attention to for yields. Bowman FOMC voting member she’s going to be speaking at one Central standard time. Important to pay attention to that to tomorrow. Like I said, we’re going to get initial and continuing claims, a 30 year bond auction and the Fed’s balance sheet. Now, some of these support and resistance levels that you can catch in our daily research report for the SRP 4996 to 5000 for the Nasdaq, 17 756 to 17, 790 for crude oil, three star resistance, 7413 to 7442.
We did get some inventory data this morning that was above estimates. We saw inventories tick up by about five and a half million barrels. And I want to see a break and close above all of these levels. If we test these levels, that’s positive. But we need a break in close to see more momentum to the upside. If you have any questions, reach out to our trade desk. We’re here for you. Remember, futures trading involves substantial risk of loss and is not suitable for all investors.