Last week, we saw a bit of a Christmas rally in the Nasdaq Composite, although all the gains got erased in the final couple of days. The market is all-in on the soft-landing trade with the Fed expected to cut interest rates soon, the labour market coming into better balance and the inflation rate on track to reach the 2% target by the end of the year. It’s hard for the bears to fight the current positive sentiment, especially without significant bearish catalysts, but such crowded trades are generally liable to fast unwinding in case the prevailing narrative proves to be wrong, so the bulls should be extra careful going forward.
Nasdaq Composite Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Nasdaq Composite dropped in the final two days of the last week erasing all the gains from the Christmas rally. From a risk management perspective, the buyers would be better off waiting for a pullback into the recent swing low around the 14767 level where they will also find the red 21 moving average for confluence.
Nasdaq Composite Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the Nasdaq Composite has been trading inside a rising channel with the price recently rejecting the upper bound of the channel. We can notice that the lower bound of the channel is right around the swing low and the 38.2% Fibonacci retracement level which adds even more confluence to the bullish setup. Moreover, we can see that the latest leg higher diverged with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals.
Nasdaq Composite Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the current price action and the support zone around the 14767 level. That’s where the buyers should step in with a defined risk below the support to position for a rally into new highs. The sellers, on the other hand, will want to see the price breaking lower to invalidate the bullish setup and position for a drop into the 14050 level.
Upcoming Events
This week is full of key economic data which will culminate with the NFP report on Friday. We begin tomorrow with the ISM Manufacturing PMI and Job Openings and given the recent trends there could be room for disappointment. Later in the day, we will get the release of the FOMC Minutes, but it’s not expected to be market-moving given that it’s three weeks old data. On Thursday, we will have another slate of US labour market data with the release of the US ADP and Jobless Claims figures. Finally, on Friday, we conclude the week with the NFP report and the ISM Services PMI.
