Fundamental Overview
The Nasdaq has been stuck in a wide range since the last FOMC decision, as the market saw it as more hawkish than expected.
The Fed continues to place great importance on the progress of inflation in order to continue cutting interest rates further, as the Fed’s Waller pointed out this week. So the market is waiting for more data to decide what the Fed will do next.
Next week’s soft CPI report is likely to trigger a strong reaction in the markets, especially given the rapid rise in Treasury yields over the past few months. This should support the stock market and lead to higher gains. Conversely, another hot CPI won’t help and could trigger another selloff.
Today we have the US NFP report and while the CPI will have more of an impact on interest rate expectations, it will still be a market moving event, especially if we get large deviations from expected numbers.
Right now, the market would like to see soft data, but not too soft. A very bad or very hot report could add more pressure to the market. Watch for wage growth as well, as the Fed’s Bowman recently emphasized that it remains above the pace consistent with their inflation target.
Nasdaq Technical Analysis – Daily Time Frame
Nasdaq Daily
On the daily chart, we can see that the Nasdaq has been in consolidation mode since the last FOMC decision with the 21000 level acting as key support. From a risk management perspective, buyers will have a better risk to reward setup around support to position for new all-time highs. Sellers, on the other hand, will want to see the price decline to increase bearish bets to new lows with the 20380 level as the first target.
Nasdaq Technical Analysis – 4 Hour Time Frame
Nasdaq 4 hours
On the 4-hour chart, we can see that the price has formed what looks like a descending triangle. Price can break on either side of the pattern, but there is generally a strong move in the direction of the breakout, so market participants will wait for that to enter or add more to their positions.
Nasdaq Technical Analysis – 1 Hour Time Frame
Nasdaq 1 hour
On the 1-hour chart, we can see that the price is decreasing as we await the US NFP release. If the price stays above the 21350 level, it would be more bullish and likely to take us to the 21700 level. Conversely, if the price stays below the 21180 level, sellers are likely to push the price into support and target a break below it. The red lines define the average daily range for today.
Upcoming Catalysts
Today we conclude the week with the US NFP report.