FUNDAMENTAL
OVERVIEW
We’ve had a rough three-day
losing streak for the Nasdaq and other major stock market indices. It’s not
clear what was the catalyst although it coincided with the release of Anthropic’s new AI tool
called Claude Plugins.
It basically demonstrated that a large portion of software could be obsolete
and weighed on tech stocks.
In reality, there were
already cautionary signs as the market was diverging with credit spreads which
have been signalling some tightening in financial conditions. In fact, the US
economic surprise index recently jumped to the highest level since November
2023. That led to some hawkish repricing in interest rates expectations.
Next week is going to be a
big one as we get the US NFP report on Wednesday and the US CPI on Friday.
Another hawkish repricing could weigh on the market. The best outcome for the
bulls should be some benign jobs data coupled with a softer than expected inflation
report.
In fact, we should be in a “good
news is good news” environment for the stock market amid the Fed’s dovish reaction
function as long as inflation continues to slowly head towards target. A quick
deterioration in the labour market at this point could trigger growth fears and
lead to a deeper correction.
NASDAQ TECHNICAL
ANALYSIS – DAILY TIMEFRAME
Nasdaq futures – daily
On
the daily chart, we can see that
the Nasdaq fell all the way back to November
lows. The dip-buyers stepped in near those lows to position for a rally into
new all-time highs. The sellers will want to see the price breaking lower to
open the door for a drop into the 23,000 level next.
NASDAQ TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
Nasdaq futures – 4 hour
On
the 4 hour chart, we can see that
the bullish momentum picked up after the price broke above the minor downward
trendline as more buyers piled in. The target should be the resistance around
the 25,188 level. If the price gets there, we can expect the sellers to step in
with a defined risk above the resistance to position for a drop into new lows.
The buyers, on the other hand, will look for a break higher to increase the
bullish bets into new highs.
NASDAQ TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
Nasdaq futures – 1 hour
On the 1 hour chart, we can
see that we have a minor upward trendline defining the bullish momentum on this
timeframe. The buyers will likely continue to lean on the trendline to keep
pushing into new highs, while the sellers will look for a break lower to pile
in for a drop back into the November lows. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today we conclude the week with the University of Michigan Consumer
Sentiment survey.
