Fundamental Overview
The Nasdaq tested the 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.
One potential bearish reason people are looking at is rising Treasury yields. That’s generally bearish when the Fed is tightening though as the market looks forward to an economic slowdown.
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 see the stock market correcting lower.
Nasdaq Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Nasdaq bounced on the trendline and extended the rally into the all-time high following Trump’s victory. The sellers will likely step in around these levels with a defined risk above the all-time high to position for a drop back into the trendline. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into new highs.
Nasdaq Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more clearly the incredible rally since the bounce on the trendline. The price is now testing the all-time high with the Fed’s decision looming. The momentum is strong but if we get a bearish reaction to the Fed’s decision in the afternoon, the dip-buyers will likely step in around the 20700 level. The sellers, on the other hand, will look for a break lower to target the trendline.
Nasdaq Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the strong bullish momentum on this timeframe is fading a bit as the price broke below the minor upward trendline. This price action might signal a pullback into the 20700 level. The red lines define the average daily range for today.
Upcoming Catalysts
Today we have the US Jobless Claims and the FOMC Policy Decision. Tomorrow, we conclude the week with the University of Michigan Consumer Sentiment report.