Fundamental Overview
At one point it looked like the worst was behind us as the Nasdaq rallied almost 5% in a single day following the BoJ and FOMC decisions. Unfortunately, the following day we got an ugly US ISM Manufacturing PMI which sent the market into risk-off and defensive positioning into the US NFP report.
The US Jobs report didn’t help as the data surprised to the downside with unemployment jumping to a totally unexpected 4.3% rate. The losses extended and eventually we got a strong overnight selloff yesterday as Nikkei crashed 12% in a single day.
At the peak of the risk aversion yesterday the markets saw the Fed cutting rates by 136 bps by year-end and some chances of an emergency rate cut. Fear is generally a stronger emotion than greed in the markets. Although the volatility calmed down a bit, the markets are still expecting a 50 bps cut by the Fed in September and a total of 110 bps by year-end.
Nasdaq Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Nasdaq eventually broke through the trendline around the 18900 level and extended the selloff into the next major trendline around the 17400 level. That’s where the buyers stepped in with a defined risk below the trendline to position for a rally into new highs. The sellers will need the price to break below the trendline to increase the bearish bets into 16000 level next.
Nasdaq Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we got a fakeout last week when the price broke above the 19300 resistance and the trendline but then dropped back below it as the US ISM Manufacturing PMI missed expectations by a big margin.
From a risk management perspective, the sellers will have a better risk to reward setup around the recent swing low at 18800 where we can also find the 61.8% Fibonacci retracement level for confluence. The buyers, on the other hand, will want to see the price breaking above the 18800 resistance and rising above the previous trendline to gain even more confidence and increase the bullish bets into new highs.
Nasdaq Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price has been printing higher highs and higher lows on this timeframe as the buyers piled in around the major trendline. At the moment, we are seeing some weakness but if the price were to drop all the way back to the 17900 support, we can expect the buyers to step in with a defined risk below the support to position for a rally into the 18800 level.
The sellers, on the other hand, will want to see the price breaking below the support to pile in and position for a break below the major trendline. The red lines define the average daily range for today.
Upcoming Catalysts
This week is basically empty on the data front. The only notable economic release will be on Thursday when we get the latest US Jobless Claims figures. The market will also pay close attention to Fed members’ comments given the latest developments in the markets.
