Nasdaq Index, Dow Jones, S&P 500 News: Volatility Expected with Triple Witching Event

James Hyerczyk
Updated: Jun 21, 2024, 16:40 GMT+00:00

Key Points:

  • S&P 500 futures decrease 0.2% as markets prepare for increased volatility from triple witching.
  • Nvidia extends losses pre-market, while Nike rises after an upgrade to "outperform."
  • Traders brace for heightened volatility from triple witching and significant index rebalancing changes.
Nasdaq 100, Dow Jones, S&P 500 News

S&P 500 Futures Edge Lower as Triple Witching Day Approaches

S&P 500 futures were slightly lower on Friday after the benchmark index briefly climbed above 5,500 for the first time. S&P 500 futures dipped 0.2%, while Dow Jones Industrial Average futures fell 25 points, or 0.1%. Nasdaq 100 futures declined approximately 0.2%.

Weekly Performance

As of Thursday’s close, all three major indices were on track for weekly gains. The S&P 500 was up around 0.8%, the Nasdaq saw a 0.2% increase, and the Dow Jones Industrial Average outperformed with a 1.4% rise for the week.

Market Movers

Nvidia shares dropped another 2% pre-market, extending Thursday’s 3.5% loss. Despite this decline, Nvidia remains up over 160% year-to-date and briefly surpassed Microsoft in market value earlier this week. Concerns about an overextended market, particularly in AI-driven stocks, have emerged, suggesting a potential rebalancing rather than a significant downturn.

Sarepta Therapeutics surged 37% following FDA approval for an expanded use of its Elevidys gene therapy for Duchenne muscular dystrophy. Nike gained 1% after Oppenheimer upgraded the stock to “outperform” from “market perform,” citing a strategic refocus on product innovation and brand-building. Asana saw a 3% increase after announcing a $150 million share buyback plan, expected to continue through June 2025.

Gilead Sciences rose over 2.6%, continuing its upward trend after announcing a successful late-stage trial for an HIV-prevention shot. LendingTree shares were slightly lower after reports of a cyberattack, and Apple ticked up following a positive price target revision from Bernstein, highlighting Apple’s potential leadership in the AI sector. Delta Air Lines increased 0.7% after announcing a 50% increase in its quarterly dividend.

Triple Witching and Volatility

Friday’s trading is expected to be more volatile due to triple witching, the simultaneous expiration of stock options, stock index options, and stock index futures. This event often leads to heightened volatility as traders close out positions. Additionally, the final day before index rebalancing, involving significant changes such as CrowdStrike joining the S&P 500 and shifts in Nvidia and Apple’s weights in the Technology Select Sector Index, may contribute to market fluctuations.

Market Forecast

Given the current trends and the anticipated volatility from triple witching, the short-term outlook for the market remains cautious. Traders should prepare for potential swings and watch for opportunities arising from the rebalancing activities. The broader market shows resilience, but selective pressure on overextended sectors, especially those driven by artificial intelligence, could lead to a mixed performance. Overall, maintaining a diversified portfolio might help mitigate risks in this fluctuating environment.

Technical Analysis

Daily E-mini Nasdaq-100 Index

Thursday’s closing price reversal top is a potentially bearish chart pattern. We don’t expect it to lead to a change in trend, but we would not be surprised by a 2 to 3 day correction. The move could be impressive because typically, this chart pattern produces a 50% correction of the current rally. In this case, 19436 is the potential downside target.

A trade through 20371.00 will negate the chart pattern and signal a resumption of the uptrend.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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