The S&P 500 and Nasdaq 100 futures faced a tumultuous first quarter in 2025, marking their worst performance in over two years. The indices not only snapped a five-quarter winning streak but also formed bearish engulfing candles, signaling potential further declines. This downturn has raised eyebrows among investors, especially given the backdrop of economic uncertainties and shifting market dynamics.
According to an article published on April 1, 2025, the bearish candle in Q1 has been a significant indicator. The S&P 500 and Nasdaq 100 both experienced notable losses, with the Nasdaq suffering declines that were nearly double those of the S&P 500. This stark contrast in performance has left market analysts questioning the resilience of tech-heavy stocks and the broader implications for the economy.
Historical data reveals that such bearish patterns are not unprecedented. There have only been six prior occurrences of this pattern on the Nasdaq 100 and seven on the S&P 500. Interestingly, Nasdaq 100 futures have historically risen in six out of seven quarters following a bearish engulfing or outside quarter, while S&P 500 futures have risen in five out of seven quarters under similar circumstances.
Despite this historical context, the current landscape is fraught with challenges. The article highlights that the Nasdaq has only declined for a second consecutive quarter on one occasion following a bearish pattern, whereas the S&P 500 has experienced this twice. These statistics suggest that while the past may offer some hope for recovery, the present economic indicators are less optimistic.
Technical analysis of the Nasdaq 100 shows that prices are currently hovering just above the 2021 high, near a critical 38.2% Fibonacci retracement level. The recent bearish engulfing candle and the 50-week simple moving average (SMA) indicate resistance levels around 20,536 to 20,700. Analysts are cautious, predicting a core bias towards a move down towards the 200-week SMA, with potential support levels at the March 2022 high of 17,436 and the 50% retracement level near swing lows around 18,100.
For the S&P 500, the outlook appears slightly less grim, although still bearish. The S&P 500's losses in Q1 were approximately half of those seen in the Nasdaq, suggesting a more resilient performance. However, last week's bearish engulfing high met resistance at the 50-week SMA and the November low, indicating that upward momentum may be limited. Analysts are eyeing downside targets that could include the 2021 high or the 5400 handle, with a break beneath potentially leading to a support zone around 5200 and the 200-week SMA just above the 5,000 mark.
Amid these developments, asset managers have shown a shift in positioning. Last week marked the first increase in net-long exposure to S&P 500 and Nasdaq futures in five weeks, with S&P 500 gross longs rising by 49.7k contracts and shorts decreasing by 202.5k contracts. However, the rapid decline in prices last week suggests a potential reversal in sentiment, leading to expectations that net-long exposure may fall in the upcoming report.
Looking at the broader economic context, the outlook for big companies' first-quarter earnings appears dim. A recent FactSet analysis revealed that of the 107 S&P 500 companies that provided guidance, 68 issued negative outlooks. This figure is notably higher than the five- and ten-year averages, indicating a growing concern among corporate leaders about future performance.
Goldman Sachs analysts have also raised their estimated odds of a recession, attributing this shift to shrinking corporate confidence and slowing economic growth. This sentiment is echoed by the S&P 500's recent performance, which reported fourth-quarter earnings growth of approximately 18%. However, the benchmark index ended March down nearly 6%, marking its worst month since 2022.
The convergence of these factors paints a complex picture for investors. While historical patterns suggest potential for recovery, the current economic indicators and corporate outlooks present challenges that could hinder growth in the near term. As the market navigates these headwinds, investors will be keenly watching for signs of stabilization or further declines.
In summary, the S&P 500 and Nasdaq 100 futures are at a critical juncture, facing their worst quarterly performance in years amid economic uncertainty. With bearish patterns emerging and corporate outlooks dimming, the path forward remains fraught with challenges. Investors will need to stay vigilant as they assess the evolving landscape and make informed decisions about their portfolios.
