S&P 500 volatility compression points to a larger move ahead
US equity index futures red; Nasdaq 100 down ~0.5%
Mortgage Market Index 240.6 vs 247.3 last week
Euro STOXX 600 index slides ~1.2%
Dollar dips; gold up ~1%; bitcoin rises >1%; US crude gains ~3%
US 10-year Treasury yield edges up to ~4.81%
Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com
The S&P 500 .SPX ended Tuesday down 0.58% at 7,673.52, leaving the benchmark about 1.6% below its August 13 record close of 7,798.99 and roughly 1.8% beneath its all-time intraday high of 7,816.70 reached the same day.
Beneath the surface, volatility continues to compress. After roughly three weeks of sideways trading, daily Bollinger Bandwidth has narrowed to its lowest reading since June 2021. The last time volatility was this compressed, the S&P 500 rallied about 4% over the following 16 trading days.
Bollinger Bandwidth does not signal direction, but the current reading suggests the market may be primed for a larger move after an extended period of consolidation.
There is no shortage of potential catalysts. Traders are weighing tensions in the Middle East, rising crude prices CLc1, a 10-year Treasury yield hovering near 4.8%, this week's CPI report and next week's Federal Reserve meeting. Any of these developments could provide the spark needed to push the index beyond its recent trading range.
On the chart, a weekly Gann line near 7,664 again helped stabilize the market on Tuesday. The S&P 500 briefly fell to an intraday low of 7,666.99 before recovering modestly into the close.
Ahead of Wednesday's opening bell, e-mini S&P 500 futures ESc1 are down about 25 points, or 0.3%, suggesting the cash index could test and potentially break that support level early in the session.
Below 7,664, support lies in the 7,620-7,577 zone, which includes the rising 50-day moving average near 7,600 and another weekly Gann line near 7,588. A break below that area would increase the risk of a deeper pullback and expose the rising 100-day moving average near 7,480 as the next level to watch.
On the upside, initial resistance is in the 7,756-7,771 area. A break above that zone could pave the way for a retest of the August record highs and put the psychologically important 8,000 level in view.
SPY•
