Yesterday, the Nasdaq Composite closed the day negative as the price retreated from overstretched levels reached after the Fed decision. We also got another slate of strong US data yesterday with the US Jobless Claims beating expectations and the US Manufacturing PMI increasing further into expansion. The comments in the PMI report were a bit worrying as there were mentions of steep rise in costs and strengthened pricing power amid the recent upturn in demand. This pushed the overall selling price inflation for goods and services up to the highest levels for nearly a year. The next inflation report will be crucial for the market as another beat will likely be taken as very bad news at this point.
Nasdaq Composite Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Nasdaq Composite yesterday retreated from the all-time high as the market pulled back from the overstretched rally triggered by the FOMC decision. There’s not much we can glean from this timeframe, so we need to zoom in to see some more details.
Nasdaq Composite Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price has been diverging with the MACD for a long time. This is generally a sign of weakening momentum often followed by pullbacks or reversals. We continue to trade inside the rising wedge, so if the price were to break below the trendline, the sellers will have much more conviction to look for new lows with the base of the wedge at 14477 being the ultimate target. For now, the buyers remain in control, so we should find them around the bottom trendline targeting the top trendline.
Nasdaq Composite Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see the recent breakout of the resistance. From a risk management perspective, the buyers will have a much better risk to reward setup around the trendline where they will also find the red 21 moving average and the Fibonacci retracement levels for confluence. The sellers, on the other hand, will need to wait for the break of the major trendline before considering new positions.