Market Overview
Wall Street has seen gains for a second consecutive session, primarily driven by Nvidia's optimistic revenue forecast, which has rekindled confidence in the AI sector. The Nasdaq 100 has led this rebound, while the S&P 500 and Dow Jones have managed to recover from earlier losses attributed to tariff concerns.
Current Market Dynamics
Despite the positive momentum, there are signs of caution. Thinning futures volume and significant psychological resistance levels suggest that a straightforward breakout to new highs may be challenging. The latest Commitment of Traders (COT) report indicates supportive positioning, and historical seasonality trends favor US equities from March onwards, hinting at limited downside risk. However, without a new catalyst, the market may remain rangebound.
Resistance Levels
Traders are closely monitoring key resistance levels: S&P 500 futures at 7,000, Nasdaq 100 at 25,500–26,000, and Dow Jones at 50,000. The fading volume suggests potential pullbacks could occur, particularly on daily charts.
COT Report Insights
The latest COT report reveals that asset managers have increased their net-long positions in S&P 500 futures to a 13-month high and in Nasdaq 100 futures to a three-week high. This positioning indicates a bullish sentiment, particularly for the S&P 500, which has seen a notable rise in gross longs and a relatively low level of shorts. The data suggests that any pullback in the Nasdaq may be limited unless a bearish catalyst emerges.
Seasonal Trends
Historically, February has been a weak month for the Nasdaq 100, with an average decline of around 5% over the past 25 years. However, this year’s performance has been relatively resilient. The seasonality from March to August typically favors US equities, supporting the view that any pullback could be limited and that new highs may be achievable later in the year.
Nvidia's Earnings and Market Position
Nvidia has forecasted first-quarter revenue of approximately $78 billion, exceeding expectations and reinforcing the ongoing AI spending from major tech companies. However, increasing competition from AMD and in-house chip development by Microsoft and Google poses a challenge to Nvidia's market dominance. While Nvidia's stock has seen a rise, its momentum appears to be waning, with resistance levels around $206 and $210 potentially attracting bearish traders.