FUNDAMENTAL OVERVIEW
The Nasdaq continues to consolidate inside a rising wedge as traders await new catalysts and a breakout on either side. The market maintains a bullish bias amid strengthening US economy and the Fed’s dovish reaction function.
Yesterday, we got a brief drop following the news of the US Department of Justice subpoenaing the Federal Reserve. The market saw the move as another attack against Fed independence amid Trump’s calls to lower interest rates faster.
A potential loss of Fed independence increases the risk of uncontrolled inflation in the future and eventually stagflation. The probability of the loss of Fed independence though remains very low as the consequences would be too big not only for the US but the global economy as a whole. So, for now it’s just noise, but the market will keep an eye on that risk.
Today, we have the US CPI report, and it could be a major market-moving release. A hot report will likely trigger some hawkish repricing in interest rate expectations and weigh on the market. On the other hand, soft data should keep the rate cuts on the table and support the upside with no more data risk.
NASDAQ TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that the Nasdaq has been compressing into a rising wedge. These types of patterns can resolve into a downside breakout taking the price to the base of the wedge or an upside breakout leading to a strong rally after the consolidation. In this case, a downside breakout could take us to the 24,900, while an upside breakout should lead to new all-time highs.
NASDAQ TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can see more clearly the choppy price action inside the wedge as traders await a breakout. The sellers will likely continue to step in around the top trendline to keep targeting the bottom trendline and eventually a breakout. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into new all-time highs.
NASDAQ TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, there’s not much we can add here as the sellers will continue to target the bottom trendline, while the buyers will look for an upside breakout or a pullback into the bottom trendline to position for new highs with a better risk to reward setup. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today we have the US CPI report. Tomorrow, we get the November US Retail Sales and US PPI reports, so it’s going to be old data. We also have a potential US Supreme Court decision on Trump’s tariffs tomorrow. On Thursday, we get the latest US Jobless Claims figures.
