The Nasdaq Composite reached the cycle high yesterday and retracted soon after despite a less hawkish Fedspeak and increased rate cuts expectations. One good reason might be the weakening of US data, especially on the labour market side, as we have also seen recently in the details of the US Consumer Confidence report. Historically, the sustained rise in the unemployment rate is bearish for the stock market.
Nasdaq Composite Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Nasdaq Composite fell into the close yesterday after piercing the cycle high at 14446. This is where the things should get interesting as the sellers will likely step in more aggressively with a defined risk above the cycle high to position for a drop into new lows. The buyers, on the other hand, might start to take some profits off the table at these levels increasing the bearish momentum.
Nasdaq Composite Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price has been diverging with the MACD right as the Nasdaq Composite was approaching the cycle high. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, it might be a signal that we could indeed see at least a deeper pullback. From a risk management perspective, the buyers would have a much better risk to reward setup around the 13700 support where we can also find the confluence with the 38.2% Fibonacci retracement level of the entire rally.
Nasdaq Composite Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price has been diverging with the MACD since the breakout of the support at 13700. The price recently broke below the lower bound of the rising channel which increased even more the odds for a pullback, although we got what could have been one last spike into the cycle high. The sellers should now start to pile in targeting first the base of the channel around the 14000 level and upon a further break lower, the support at 13700. The buyers, on the other hand, should lean on those levels to position for a rally into new highs.
Upcoming Events
Today we will get the US PCE and US Jobless Claims data with the market likely focusing more on the Jobless Claims figures given that we already saw the latest inflation data with the US CPI report just two weeks ago. Tomorrow, we conclude the week with the US ISM Manufacturing PMI which missed expectations by a big margin the last time.
