Fundamental Overview
The US CPI report yesterday came in line with expectations and sealed the 25 bps cut next week with the probabilities standing around 97%. The Nasdaq rallied strongly as there were fears of potentially higher than expected data and the hedges into the CPI release got unwound.
Overall, the market’s pricing remains largely unchanged around three rate cuts by the end of 2025. We will likely need stronger evidence of inflation re-accelerating to price out the remaining rate cuts. For now, the conditions for further upside remain in place.
In fact, Trump’s policies should be a positive driver for growth in 2025 and with the Fed remaining in an easing cycle, growth should remain positive and might even accelerate as seen already recently by the Atlanta Fed GDPNow indicator.
The risk in 2025 will be inflation and the Fed’s reaction function. Right now, the Fed’s reaction function is that a strong economy would warrant a slower pace in the easing cycle and not a tightening. That should still be supportive for the stock market.
If the Fed’s reaction function were to change to a potential tightening, then that will likely trigger a big correction in the stock market on expected economic slowdown. For now, we remain in a “buy the dip” environment.
Nasdaq Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Nasdaq extended the rally into a new all-time high following the US CPI release. From a risk management perspective, the buyers will have a much better risk to reward setup around the major trendline. The sellers, on the other hand, will want to see the price breaking lower to target a drop into the 20381 level.
Nasdaq Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a minor trendline defining the current bullish momentum on this timeframe. If we get a pullback into it, we can expect the buyers to lean on the trendline to position for new highs, while the sellers will look for a break lower to position for a break below the major trendline.
Nasdaq Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we have the recent high that might act as support if the bullish momentum remains strong. The buyers will likely step in around the support to target new highs, while the sellers will look for a break lower to position for a drop into the trendline. A hot US PPI today might provide a pullback, while soft figures should trigger another rally. The red lines define the average daily range for today.
Upcoming Catalysts
Today we get the latest US jobless claims figures and the US PPI report.
