On the daily chart below, we can see that the Nasdaq has eventually reached the bullish flag target at 13000 and extended a bit into the key 13174 resistance. The price got rejected there as the “sell the fact” trade of the debt ceiling deal started to follow through. We can see that we have a divergence with the MACD right when the Nasdaq is at the key resistance. Will this be the top or we are just seeing a pullback with new highs following thereafter?
Given that the debt ceiling risk is out of the way now, we can care more about the economic data going forward. The next big support will be the upward trendline, where the price will also encounter the red 21 moving average. A breakout below that support zone will be significant especially if it’s supported by negative fundamentals for the Nasdaq.
Nasdaq Composite Technical Analysis
On the 4 hour chart below, we can see that an eventual pullback should find support at the 12660 level where we will also have confluence with the red 21 moving average. Yesterday, the big beat in US Job Openings weakened the Nasdaq a bit as rate hike odds jumped to 70%, but the losses were quickly erased soon after as some Fed officials hinted to the possibility of skipping the June hike to see more data and decide what to do at the July meeting.
Today, we have the US Jobless Claims and the ISM Manufacturing PMI but given the recent Fed members’ comments we may not see much movement unless we get some really big surprises. A big miss should weigh on the Nasdaq as the market may fear a recession, while a big beat may be both good and bad. On one hand, the market may cheer about the resilience in the economy, but on the other hand, it may also fear more rate hikes as inflation might remain stubbornly high.
On the 1 hour chart below, we can see that we have a strong support zone at the 12660 level where we can find also the 61.8% Fibonacci retracement level and the 4-hour long term moving average. The buyers are likely to lean on this level with a defined stop just below it and the breakout of the 13174 resistance as target.
The sellers, on the other hand, will want to see the price to break below the support zone to pile in and target the trendline and the swing low level at 12400. A break below the trendline should open the door for a bigger fall into the 11800 level.
The upcoming US NFP report will be the centre of attention tomorrow. If the data turns out to be positive and accompanied by an increase in average hourly earnings, it could potentially weaken the Nasdaq as concerns about a wage price spiral may arise. On the other hand, if the data is good but there is a miss in average hourly earnings, it should be the most favourable outcome for the Nasdaq, possibly driving it to new highs.
In the event of bad data, it should be simply seen as negative. However, it's not uncommon for the market to rally based on hopes of fewer interest rate hikes and disregard the deteriorating data. Therefore, it's important to pay attention to the technical aspects to help navigate the price action.
