Fundamental Overview
Yesterday, we got some goldilocks data as the US CPI report came in on the softer side and the US Jobless Claims remained stable. Despite this, the Nasdaq sold off and erased all the gains from the US NFP report.
The culprit seemed to be rotation being driven by hedge funds facing short squeeze on their small cap hedges as yields come down, noted Bob Elliott CIO at Unlimited Funds. In fact, the Russell 2000 displayed an opposite price action with the index having its biggest daily performance against the Nasdaq on record.
This is generally very short-term stuff, so it wouldn’t be surprising to see the Nasdaq going back to its usual upward trend today.
Nasdaq Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Nasdaq has a pretty bad day yesterday following the US CPI release. The price is now testing a key daily trendline around the 20390 level. This is where we can expect the buyers piling back in with a defined risk below the trendline 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 19730 level next.
Nasdaq Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a strong support zone around the 20390 level where we can find the confluence of the trendline, the previous resistance now turned support and the 50% Fibonacci retracement level. The buyers should lean on this support, while the sellers will want to see it breaking.
Nasdaq Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have some minor consolidation right at the support zone. If the price were to break above the 20500 level, we will likely see the bullish momentum increasing as the buyers will likely pile in with more conviction. The red lines define the average daily range for today.
Upcoming Catalysts
Today we conclude the week with the US PPI and the University of Michigan Consumer Sentiment survey.
