Nasdaq 100 & S&P 500 Under Pressure as Rising Yields Signal Risk-Off Conditions

What to Know

• US 10-year yield rises to ~4.435%, weighing on risk appetite
• Higher yields continue to pressure overbought equity markets
• Nasdaq 100 is vulnerable after a strong rally, with support at 28,500 and 28,000
• S&P 500 consolidates near 7,400 with potential pullback toward 7,300
• Friday’s US jobs report may act as a key volatility trigger
• Overall trend remains bullish, but entry timing is becoming critical

The backdrop right now is one of higher rates in general, which is a major problem for risk appetite. The 10-year yield on Tuesday morning has reached the 4.435% area. We’re elevated again and this is mainly due to the he-said she-said nature of the negotiations between the Americans and the Iranians via news and social media.

As long as it looks like there won’t be an actual decision made that favors some type of resolution, I do think you have a problem where rates will continue to go higher. If that’s going to be the case, then this does work against risk appetite and risk assets such as US indices. The Nasdaq 100 is highly sensitive to rates due to the fact that there are so many tech companies involved, but regardless, even without the interest rate situation, US indices in general are overbought and if you are patient, you might get an opportunity.

NASDAQ 100

The Nasdaq 100 has fallen a bit early during the session and I think that’s okay. I don’t think that changes much other than it introduces something called gravity to the situation. The 28,500 level is an area I’d be looking at as potential support, followed by 28,000.

While you certainly cannot short the market right now, chasing the Nasdaq 100 all the way up at these levels would be somewhat dangerous and potentially deadly to your account. You do not want to sit on a 900-point loss. I think a little bit of patience goes a long way here and one of the things that will help is if the 10-year yield in the United States can fall.

S&P 500

The S&P 500 has pulled back just a touch as well. It’s not as stretched as the Nasdaq 100 as we’re hanging around the 7,400 level, but I’d love to see a pullback to the 7,300 level in order to take advantage of a little bit of value.

The jobs number is on Friday. That could be the catalyst or maybe it’s just anticipation of that catalyst that brings the S&P 500 down a little bit.

Either way, I do think we will go higher eventually. I just want to find decent entry points and chasing a market that’s gone straight up in the air for 6 weeks straight is not a decent entry point. Again, patience is key here.

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