This first half of the week was highlighted by big misses in the US economic data like Job Openings, Consumer Confidence and ADP. These might be the first signs that a recession is indeed on the horizon as the labour market is starting to show weakness. In fact, the market is no longer seeing the Fed hiking interest rates as the September and November probabilities dropped further and the rate cut expectations were brought forward. Nonetheless, despite the worrying data, the Nasdaq Composite rallied strongly as if nothing bad happened at all. There could be different reasons that range from a relief rally due to dovish expectations and lower yields or the market interpreting the softer labour market readings as good news for inflation going forward. Until we see more data, the technicals will help in managing the risk and in identifying the most probable market directions.
Nasdaq Composite Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Nasdaq Composite has bounced strongly from the key 13174 support and rallied all the way back to test the broken trendline. Will this be a classic “break and retest” move? There isn’t much to lean on for the sellers except the trendline, and the moving averages are crossing back to the upside which might be a bullish signal.
Nasdaq Composite Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have also the 61.8% Fibonacci retracement level around the trendline that can give the sellers some structure to position for a move lower. In fact, if the price falls below the Fibonacci level, the sellers are likely to pile in with a defined risk above the trendline and target a break below the 13174 support.
Nasdaq Composite Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the resistance zone formed by the previous support now turned resistance, the broken trendline and the 61.8% Fibonacci retracement level. We can also see that we might be forming a bearish flag pattern, but the price will need to break below the bottom trendline to confirm it. In any case, a break below the steep trendline will give the sellers more conviction for a downside move, while the buyers will want to see the price breaking higher to keep targeting the highs.
Upcoming Events
This week is all about the US labour market data and the recent releases haven’t been encouraging on a forward-looking basis. Today, the main event will be the US Jobless Claims report accompanied by the US PCE data. Tomorrow, we conclude the week with the US NFP and ISM Manufacturing PMI reports. It’s hard to see the Nasdaq Composite climbing even if the data misses as the signals for a recession are accumulating, but the stock market always finds ways to surprise even in the face of economic problems.
