FUNDAMENTAL OVERVIEW
The Nasdaq is approaching new all-time highs as risk sentiment remains positive amid lower geopolitical tensions, a neutral Fed and improving US growth. These drivers are supportive for the stock market and will likely take us to new record highs unless we get a hawkish repricing in the next couple of weeks.
In fact, we are now entering a pivotal month when we will get new tier one data including the US NFP and CPI reports. What could weigh on the market in the short-term is a hawkish repricing in interest rate expectations caused by strong data.
Traders are pricing in 48 bps of easing by year-end compared to 25 bps projected by the Fed. In case we get strong data, the market will need to reprice that at least to get in line with the Fed’s view. If the data continues to surprise to the upside or comes out too hot, then we could see all the rate cut bets getting quickly trimmed.
In the bigger picture, as long as inflation continues to slowly head towards target, the stock market should remain supported amid the Fed’s dovish reaction function. A quick deterioration in the labour market though could trigger growth fears and lead to a correction.
NASDAQ TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that the Nasdaq is approaching the all-time highs. That’s where we can expect the sellers to step in with a defined risk above the highs to position for a drop into the major trendline. The buyers, on the other hand, will look for a break higher to increase the bullish bets into new record highs.
NASDAQ TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can see that we have a minor upward trendline defining the bullish momentum on this timeframe. From a risk management perspective, the buyers will have a better risk to reward setup around the trendline to keep pushing into new highs, while the sellers will need a break lower to increase the bearish bets into the 25,000 level next.
NASDAQ TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we can see that we have a minor counter-trendline acting as resistance. The sellers will likely continue to lean on it to target a pullback into the major upward trendline, while the buyers will want to see a breakout to increase the bullish bets into new record highs. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today we get the latest US Jobless Claims figures. Tomorrow, we conclude the week with the US PPI report.
