The Nasdaq sold off sharply
yesterday after US Core CPI came in higher than expected. What’s interesting,
though, is that after the initial hawkish reaction, rate expectations further
out the curve shifted in a dovish direction, and Treasury yields moved lower.
Copper, which is often seen
as a barometer of global growth, also fell sharply following the CPI release.
This might be an early sign that markets are becoming increasingly concerned
about the future economic outlook.
The prolonged Middle East
crisis is adding to those concerns, while persistent inflation risks could
force the Fed to raise rates more than expected or keep them higher for longer.
That could leave the Fed behind the curve if economic conditions start to
deteriorate.
Credit spreads have been
flashing warning signs for several weeks, and the equity market may now be
starting to catch up. Looking ahead, the Flash PMIs, the FOMC meeting,
developments in US-Iran negotiations and the US midterm elections will be key
catalysts.
If economic data starts pointing
to deteriorating conditions, the concerns about growth could intensify, putting
further pressure on risk sentiment and the Nasdaq. On the other hand, an end to
the US-Iran war could significantly change the picture by easing geopolitical
uncertainty and improving the growth outlook.
NASDAQ TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On
the daily chart, we can see the Nasdaq (US100 CFD contract) is breaking below the major upward trendline. The
sellers will likely pile in around these levels, with a defined risk above the
trendline, to keep pushing into the 28,742 level. If the price gets there, we
can expect the buyers to step in, with a defined risk below the level, to
position for a rally into new record highs. The sellers, on the other hand,
will look for a break lower to increase the bearish bets into the 26,971 level
next.
NASDAQ TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On
the 4 hour chart, we have a minor
downward trendline defining the bearish momentum. If we get a pullback, we can
expect the sellers to lean on the trendline, with a defined risk above it, to
keep targeting new lows. The buyers, on the other hand, will look for a break
higher to pile in for a rally into new record highs.
NASDAQ TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, the
broken trendline could act as resistance on a retest. The sellers will likely
step in there, with a defined risk above it, to keep pushing into new lows. The
buyers, on the other hand, will look for a break higher to start positioning
for a pullback into the downward trendline. The red lines define average daily range for today.
UPCOMING CATALYSTS
Today we get the US PPI, the
US Retail Sales and the latest US Jobless Claims figures. We have also Fed
Chair Warsh speaking very late in the day in a fireside chat with IMF Managing
Director Georgieva. He’s against forward guidance, so he’s unlikely to give any
policy signal, but it’s worth keeping an eye on it.
This article was written by Giuseppe Dellamotta at investinglive.com.