Stellar Nvidia results drive a recovery in US index futures

US index futures have been on a corrective path for a few weeks. However, in recent days there has been a change in sentiment. The move seems to have been rather counter-intuitive. The USD has been strong, and this week the US 10-year Treasury yield hit 15-year highs—both risk-negative moves. There is one explanation that holds water, though: the anticipation of results from Nvidia, the company that has been one of the major reasons behind the rally of index futures in recent months. Traders thought they might be in store for a strong set of Q2 results from Nvidia, and they were not disappointed. This gives the potential for further recovery in the futures.

• The stellar results from Nvidia do not disappoint.

• Nvidia is once more dragging index futures higher.

• Technicals show a shift in near-term outlook on the e-minis of NASDAQ 100 and S&P 500.

Nvidia is in a rare and impressive moment of growth. The Q1 results laid out for investors the incredible growth potential that the company could see in making chips that power Artificial Intelligence (AI) computing. So the anticipation for Q2 results has been ramping up this week. The company did not disappoint.

For a third quarter in a row, Nvidia has beaten estimates on sales figures. However, it did not just beat the estimates this time; it obliterated them (and even that might not be a strong enough term). Sales of $13.51bn were not even in the same ballpark as estimates of $11.13bn. Neither for that matter were the earnings of $2.70 per share (versus estimates of $2.07).

But what about the current quarter? After all, this has been an earnings season where companies have consistently beaten estimates only to have the share price scuppered by underwhelming guidance. For the current quarter (Q3), sales projections have been guided up to $16bn by the board. This is an enormous leap from the current estimates that Bloomberg has of $12.5bn.

Furthermore, just to top it all off, the company has also agreed to an additional $25bn share buyback programme.

Markets are loving the results.

The after-hours performance of Nvidia shows that markets have been impressed. The shares have already been rallying in recent days in anticipation of the results. However, a jump of a further 6.6% in the shares after hours indicates that there will be a continued run higher.

The Nvidia shares look set to be hitting all-time highs again today. This is helping the e-mini NASDAQ 100 futures to outperform once more. For the tech-heavy index, the prospects for gains look decent; however, it is interesting to see that the gains on the S&P 500 futures are far less decisive, while Dow futures are trading lower. The strength of Big Tech is once more carrying the hopes of the bulls. But can it continue?

US index futures rally, but can the move hold?

US index futures have been on a decisive correction in recent weeks. However, the rally that Nvidia shares have managed to help generate on US index futures this week has been impressive and has helped to improve the technical outlook. The recovery is already up to an important crossroads on both the e-mini NASDAQ 100 futures and S&P 500 futures. This is key because if the Nvidia rally falters, then the index futures are also likely to drift away.

Looking first at the e-mini S&P 500 futures, there has been a strong rebound from 4350 that has broken the three-week downtrend. However, a crucial band of resistance lies between 4494/4517. This is the overhead supply of the past couple of months and already today has seen the futures backing away.

The daily Relative Strength Index (RSI) has unwound towards 50. Once more, this is at a key level, as a failure around here would be a classic area to have renewed downside potential for the next move lower. Reaction to the 4494/4517 resistance will be pivotal. A close above opens an immediate test of 4545 above, which is the all-time high at 4634 again. However, a bull failure around the resistance could see the 4425/4440 near-term breakout support tested. Below 4395 would confirm a renewed corrective outlook.

The e-mini NASDAQ 100 futures look more positive in the recovery, however, are also facing an important crossroads. The resistance between 15324/15498 is a collection of important highs and lows over recent months. These levels make resistance as they will be housing a raft of positions, perhaps set to take advantage of this unexpected rally and could be closed out. This resistance needs to be cleared for the market to continue this rebound.

Momentum in the move does look more positive, though, holding decent gains today, with the RSI in the mid-50s. However, until there is a confirmation break above resistance at 15610, there will still be an element of caution to backing this as a sustainable recovery. That would then open 15917 as the next resistance. Intraday charts show initial support at 15295 and then 15167.

Looking ahead: Nvidia’s momentum will be crucial to whether US index futures can sustain their recovery or if resistance levels will trigger another downturn.

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