Fundamental Overview
Last week, we got a pullback in the Nasdaq as the higher-than-expected inflation readings and a less dovish Powell weighed a bit on the market.
Despite the recent events though, the market’s pricing remained largely unchanged at three rate cuts by the end of 2025. This might be a signal that the market is now fine with the current pricing, and we will need stronger reasons to price out the remaining rate cuts.
The only bearish reason we had for the stock market was the rise in Treasury yields. That’s generally bearish only when the Fed is tightening policy though 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 in the bigger picture considering that Trump’s policies include tax cuts and deregulation.
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 pullbacks look as something healthy and opportunities to buy the dips.
Nasdaq Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Nasdaq pulled into the key trendline and bounced off of it as the dip-buyers stepped in with a defined risk below the trendline to position for a rally into a new all-time high. The sellers will need the price to break below the trendline to start targeting the 20K level.
Nasdaq Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price is now consolidating around the previous swing level at 20788. The buyers will likely pile in around these levels to increase the bullish bets into new highs, while the sellers might want to step in here to position for a break below the major trendline.
Nasdaq Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more clearly the recent price action with the strong rebound from the trendline. There’s not much else we can add here as the buyers will look for dip buying opportunities around these levels, while the sellers will need to break below the major trendline to gain more conviction for further downside. The red lines define the average daily range for today.
Upcoming Catalysts
Tomorrow, we get the latest US Jobless Claims figures, while on Friday we conclude the week with the US PMIs.
