Last week the US data surprised to the upside with the ISM Services PMI and Jobless Claims beating expectations by a big margin. The market didn't like the strong data as it raises the chances of another rate hike in November. In fact, the Nasdaq Composite sold off following the PMI beat with some consolidation thereafter, even after the strong Jobless Claims. The market seems to be trading on “good news is bad news” at the moment, but the outlook remains uncertain.
Nasdaq Composite Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Nasdaq Composite retested the broken trendline and sold off following the strong US data release into the red 21 moving average where it bounced as the buyers stepped in. The moving averages are still crossed to the upside, so the bias remains bullish, but the buyers will need some key breakouts to keep on rallying.
Nasdaq Composite Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price is trading around the minor upward trendline which is defining the bearish flag pattern. A break below the trendline should confirm the pattern and lead to a fall into the 13174 support. The buyers are likely to step in here targeting a break above the 13850 resistance to invalidate the bearish setup.
Nasdaq Composite Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the key 13850 resistance zone that is likely to decide where we will go next. In fact, a break above the resistance zone and the downward trendline should invalidate the bearish setup and give the buyers more conviction to target a new higher high. The sellers, on the other hand, are likely to pile in here around the resistance with a defined risk above it and target a selloff into the 13174 support.
Upcoming Events
This week is likely to be a volatile one given the release of top tier economic indicators including the US CPI. In fact, on Wednesday we get the US CPI report, which is expected to show an acceleration in the headline inflation but a deceleration in the core measure. On Thursday, we get the US PPI, Retail Sales and Jobless Claims data. Finally, we conclude the week with the University of Michigan Consumer Sentiment report on Friday.
