The latest Non-Farm Payrolls (NFP) report has beat expectations, extending its impressive winning streak to 14. However, upon closer examination, we discover some aspects that are not as positive. The unemployment rate experienced its largest increase since the pandemic, rising from 3.4% to 3.7%. Additionally, there was a slight decline in average weekly hours, which could indicate the possibility of potential layoffs. Overall, the report presented a diverse set of results, allowing everyone to interpret it in their own way.
The US ISM Services Purchasing Managers' Index (PMI) came in lower than anticipated at 50.3, narrowly missing the threshold for contractionary territory. The employment sub-index showed a contraction, while the prices paid sub-index experienced a substantial decrease, returning to levels last observed in May 2020. As a result, the market further discounted the likelihood of additional interest rate hikes by the Federal Reserve (Fed).
In recent days, the Reserve Bank of Australia (RBA) and the Bank of Canada (BoC) surprised the markets with rate hikes, which may have influenced risk sentiment. This development has raised concerns that the Fed might follow a similar path. However, it seems unlikely considering the Fed's usual approach of responding to market pricing, and we should also bear in mind that the Consumer Price Index (CPI) report has not yet been released.
Nasdaq Composite Technical Analysis – Daily Timeframe
On the daily chart, the Nasdaq Composite struggled to extend the rally past the key 13174 resistance. There’s a curious divergence going on from the other major indices considering that the tech stocks are the current market hype. Maybe, we reached the top of the AI hype? Anyway, the price has converged back with the 8 blue moving average, which is a good thing for a healthy trend, and now we may be looking at a bigger pullback into the 12800 area before the next big move.
Nasdaq Composite Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a strong support zone at the 12660-12800 price area. There we can find the confluence of the trendline, a previous swing high level and the 61.8% Fibonacci retracement level.
The buyers are likely to lean on that level with a defined risk below the trendline and target again a breakout of the 13174 resistance for new highs. The sellers, on the other hand, are likely to pile in aggressively if the price breaks below the trendline to extend an eventual selloff into the 12274 support.
Nasdaq Composite Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the Nasdaq Composite has broken below a key level yesterday and the short term trend structure has switched to the downside. The moving averages crossover is also signalling a change in momentum, and we should see the price moving lower from here. The divergence with the MACD right at the key 13174 resistance was also a hint to a possible pullback incoming.
The US Jobless Claims report is the event to keep an eye on today in terms of risks. However, its impact on the market is likely to be limited unless there are notable deviations from the expected numbers:
- If the report beats expectations by a significant margin, it could bring a sense of cautious optimism to the markets. A strong performance in the labour market, along with a cooling trend, might suggest a smooth transition and potentially contribute to bringing inflation closer to the target. This could be seen as a positive development.
- Conversely, if the report misses expectations in a big way, it could dampen market sentiment and potentially trigger a decline in the Nasdaq Composite. Such a scenario might revive concerns about an economic recession, which could have negative implications for market performance.
