Fundamental Overview
The Nasdaq rallied into a new all-time high following Trump’s victory and the red sweep as the market started to look forward to bullish drivers like tax cuts and deregulation.
The only bearish reason people were looking at was the rise in Treasury yields. That’s generally bearish only when the Fed is tightening policy not when yields rise on positive growth expectations.
Right now, the Fed’s reaction function is that a strong economy would warrant an earlier pause in the easing cycle and not a tightening. That should still be supportive for the stock market.
If the Fed’s reaction function changes to a potential tightening, then that will likely trigger a big correction in the stock market on expected economic slowdown.
For now, the current pullback looks as something healthy given the very strong rally following Trump’s victory, so the dip-buyers should be happy about it.
Nasdaq Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Nasdaq pulled back to a key swing high level at 20790. This is where we can expect the buyers to step in with a defined risk below the level to position for a rally into a new all-time high. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the major trendline.
Nasdaq Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have also the 38.2% Fibonacci retracement level standing right around the swing high level. This should technically strengthen the support level and give the buyers a nice level where to lean onto and protect their stops. The sellers, on the other hand, will look for a break lower to extend the pullback into the trendline.
Nasdaq Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor downward trendline defining the current pullback. The sellers will likely keep on leaning on it to position for new lows, while the buyers will look for a break higher to increase the bullish bets into a new all-time high. The red lines define the average daily range for today.
Upcoming Catalysts
Today we conclude the week with the US Retail Sales report.
