It looks like the more hawkish than expected FOMC Dot Plot last week was kind of a wakeup call for the market as it’s been selling off with almost no pullback ever since. The resilience in the economy is keeping the Fed on the hawkish camp as it wants to see more weakness in the data, especially on the labour market front. We’ve seen a huge rally since the lows back in October 2022 as the market continued to see a soft landing but even Fed Chair Powell said that it’s not his base case, although they are aiming for it. With so many bearish drivers that accumulated throughout the first half of 2023, the market might be at risk of a major fall now.
Nasdaq Composite Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Nasdaq Composite is taking a breather after breaking below the key support around the 13174 level where we had the confluence with the trendline and the 38.2% Fibonacci retracement level. The risk of further downside remains very high though and the sellers will keep on piling in around these levels.
Nasdaq Composite Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more closely the key support now turned resistance and the small rally yesterday to retest the broken zone. Will this turn into the classic “break and retest pattern”? The buyers will need the price to break back above the resistance with conviction to start piling in and target the highs.
Nasdaq Composite Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price is diverging with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we might see a pullback into the trendline and the 38.2% Fibonacci retracement level where the sellers should pile in with a defined risk above the trendline and target the 12274 support. The buyers, on the other hand, will want to see the price breaking above the trendline to pile in and position for a rally into the previous highs.
Upcoming Events
Today the main event will be the US Jobless Claims report. At this point, looks like there’s not much difference if it’s strong or weak data as the former would keep the Fed hawkish and even raise the risk of higher rates, while the latter might point to a recession. Nonetheless, the last time the market rallied on weak data as it decreased the risk of further tightening and brought down Treasury yields. Tomorrow, we will see the latest US PCE data which is unlikely to change much in terms of market pricing unless we see some big surprises.
