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S&P 500 Holds Steady Above Key Support at 4,300: What to Expect Next

By Michael KramerMarket OverviewOct 19, 2023 03:12AM ET
www.investing.com/analysis/sp-500-holds-steady-above-key-support-at-4300-what-to-expect-next-200642847
S&P 500 Holds Steady Above Key Support at 4,300: What to Expect Next
By Michael Kramer   |  Oct 19, 2023 03:12AM ET
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Stocks finished sharply lower as rates reached new cycle highs on the long end of the curve, and the yield curve steepened. This led to a drop of about 1.3% on the S&P 500, bringing the index down to around 4,315. This retraces about 50% from the rally following the Job report.

For now, the index managed to find some support at 4,310, and a gap below that level today would probably suggest that the double top on the hourly chart has broken, which could lead to a decline back to the lows on October 6 around 4,220, and potentially lower.

S&P 500-1-Hour Chart
S&P 500-1-Hour Chart

30-Year and 3-Month Spread Approaches Resistance

The spread between the 30-year Treasury and 3-month Treasury rose by seven bps to around -51 bps and is approaching what appears to be an important resistance region around -40 bps. A break above that -40 bps could result in a much bigger rise in the inversion, and one would think that it potentially heads back to 0%.

I would think that most gains could be from the 30-year rate rising. Unless the Fed starts cutting rates, sending the 3-month sharply lower (which I don’t see happening anytime soon), the only way for the curve to steepen further is by the back of the curve rising to the front.

US30Y-US03MY-Daily Chart
US30Y-US03MY-Daily Chart

From a technical standpoint, there are a few ways to measure a move in the 30-year up to 5.4%.

US 30-Year Yield-4-Hour Chart
US 30-Year Yield-4-Hour Chart

Biotech Sector Back to October Lows

It is probably worth pointing out that today’s Biotech sector is almost back to October 2022 lows. This ETF rallied by 51% off the low, has fallen 25% since June, and is almost back where it started a year ago.

XBI ETF-4-Hour Chart
XBI ETF-4-Hour Chart

Netflix Stock Gains Post Earnings

Netflix (NASDAQ:NFLX) is trading higher by around 12% following what looked like really good results. Net streaming subscribers easily beat expectations, and what was impressive was that free cash flow rose by $1.9 billion in the quarter, much higher than the estimated $1.27 billion.

Cash flow from operation was even stronger at nearly $2 billion, which means it hit a new high of $6.1 billion on a trailing twelve-month basis. If the price follows cash flow, the stock could go higher over the longer term.

Netfilix Price Chart
Netfilix Price Chart

However, the stock rose sharply for now, right to a big uptrend line, which is where the stock stopped. It seems pretty clear that the resistance level right now is around $390, which could limit the upside.

Netflix-4-Hour Chart
Netflix-4-Hour Chart

Tesla Misses Revenue and Earnings Estimates

On the other hand, Tesla (NASDAQ:TSLA) did not report a good quarter, missing on revenue and earnings, while automotive gross margins came in at 15.7%, missing estimates of 19.2%, and operating margins came at 17.9%, missing estimates of 18.3%.

Free cash flow also missed estimates of $2.7 billion, instead coming in at $848 million. One would think this stock would be down big, but it isn’t. Just really bad numbers all around. The stock is trading down after hours, but it is probably not down enough. The symmetrical triangle is broken, which probably means the stock revisits the $220s again at some point in the near future.

Tesla-4-Hour Chart
Tesla-4-Hour Chart

Original Post

S&P 500 Holds Steady Above Key Support at 4,300: What to Expect Next
 

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S&P 500 Holds Steady Above Key Support at 4,300: What to Expect Next

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Comments (4)
Ayan Abas
Ayan Abas Oct 21, 2023 11:45PM ET
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Fa Cai
Fa Cai Oct 19, 2023 7:47PM ET
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Read your Article Every Day! Thanks a lot!
giuseppe pietrapiana
giuseppe pietrapiana Oct 19, 2023 8:24AM ET
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Thanks 🙏
Leyla LA
Leyla LA Oct 19, 2023 7:34AM ET
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Your articles are verry usefull🙌.Thnx 🙏
 
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