Nasdaq 100 and S&P 500 Rally as Falling Yields Support Risk Appetite

What to Know

• U.S. indices are rallying as 10-year Treasury yields fall toward the key 4.30% level, boosting risk appetite.
• The Nasdaq 100 remains bullish but shows signs of short-term overextension, favoring a buy-the-dip strategy.
• 25,000–25,400 is a key support zone for the Nasdaq 100 on potential pullbacks.
• The S&P 500 continues higher but faces strong resistance near the 7,000 psychological level.
• Geopolitical risks and supply chain concerns, particularly around the Strait of Hormuz, remain key volatility drivers.

Currently we find ourselves in more of a risk appetite driven rally which is directly coordinated with rates dropping in the United States. As a proxy, I use the 10-year yield, which is currently right around the 4.29% level. It is worth noting that the 4.30% level has at least recently been where traders are flipping the script. If it goes too far above 4.30%, then they tend to sell risk appetite and vice versa.

NASDAQ 100 (NAS100)

The Nasdaq 100 is starting to show signs of overextension, although I do remain bullish as long as there is hope for some type of peace. The volume is fairly strong, but I would love to see a little bit of a pullback before committing a ton of capital to this market. The 25,000 level right now is my floor in the market. Granted, that is 536 points below where we sit as I record this, but I also recognize that somewhere near the 25,400 level there is an area of noise as well that could offer a floor.

Simply put, I would prefer to buy dips, wait for the market to bounce a little bit, and ride the rally back up, buying on the right-hand side of the V-shape that will certainly show itself on shorter timeframes such as the hourly chart.

S&P 500

The S&P 500 is just as bullish, just as overextended, and just as sensitive to the 10-year yield. I think ultimately you have to look at this as a market that is a buy on the dips market as well, but keep in mind that 7,000 level was like a brick wall for something like 40 or 50 days. I would anticipate that the market will gravitate towards it; I do not think we will slice through it easily. If we do, that would be an extraordinarily bullish sign.

All of that being said, keep in mind that it is not only the 10-year yield that is throwing the markets around; it is obviously headlines coming out of the Middle East. There are a lot of concerns about the knock-on effects of the Strait of Hormuz being closed as a very vulnerable part of the world’s supply chain has just been exposed.

International Supply Chains and Stocks

Ironically, it could very well be US indices that benefit from chaos anyways. After all, most of the energy component for the United States has nothing to do with the Strait of Hormuz. That helps a lot of the input pricing for companies, as opposed to a place like Germany, which is very vulnerable to it. In fact, it is something like 1% or maybe even less than that of petroleum that the United States imports, which isn’t much these days, comes through the Strait of Hormuz.

So, it is really not a US problem. Where it gets to be problematic is through the supply chain. If you are trying to outsource something from China or from Spain, for example, whatever, you are going to have issues there. So probably a bit of a safety trade here as well; I imagine a lot of foreign investors look at New York still through the same prism of that is where the biggest and most liquid markets are. Therefore, in general, I am bullish on indices in the US, but I would like to see a pullback. Furthermore, keep in mind a random headline could cause chaos. Unfortunately, we have seen a lot of that over the last couple of weeks.

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