The Federal Reserve surprised the market by maintaining interest rates at 5.00-5.25%, while increasing the projected terminal rate in the Dot Plot by 50 basis points. In order to assess additional economic data, the Fed chose to pause at this meeting before making a decision on a potential interest rate hike in July. This decision appears to be justified due to the weaker details in the latest NFP report and further disinflation in the latest CPI report, although the core readings remain persistently high.
During the press conference, Fed Chair Powell acknowledged that the July meeting is "live," although he refrained from making any definitive commitments. Initially, the market reacted negatively to the Dot Plot release, resulting in a decline, but quickly regained its original levels once Powell's press conference got underway. Overall, this indicates that the Federal Reserve is prepared to take further action to combat inflation, with the ultimate course of action dependent on economic data .
Nasdaq Composite Technical Analysis – Daily Timeframe
On the daily chart, we can see that that after breaking the key 13174 resistance, the Nasdaq Composite took off and extended the rally to the 13658 high as more FOMO kicked in. The next big resistance stands at 14650, so there’s a big room to the upside if the bullish trend remains intact. This will of course depend on the economic data, with the labour market reports probably being the most important given the Fed’s focus on the jobs data.
Nasdaq Composite Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have the moving averages acting as dynamic support for the buyers. As long as they remained crossed to the upside, we can expect the bullish momentum to continue. A crossover would signal a switch to a more bearish bias that could lead to a bigger pullback or a reversal, so that is something to keep an eye on.
Nasdaq Composite Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the Nasdaq Composite has recently bounced from a minor upward trendline and the red 21 moving average. This was caused by the quick spike down after the dot plot and then a quick rally back to the original levels as Fed Chair Powell started to speak.
The buyers may keep on piling in at every break of the high, but as we can see by the divergence with the MACD, the momentum is weakening, and a pullback may be due. From a risk management perspective, the buyers may be better off leaning on the major upward trendline roughly at the 12800 level before another push to the upside. The sellers, on the other hand, may pile in at the break of the minor upward trendline to target the major trendline first and a break lower next.
Today, we will have the US Jobless Claims and Retail Sales reports. Tomorrow, the attention will turn to the University of Michigan Consumer Sentiment survey. A big miss in the Jobless Claims data could potentially indicate trouble for the market, suggesting a rapid deterioration in the labour market. Conversely, if the data beats expectations, it should help sustain the market's positive trend. Additionally, market participants will be eager to see a decrease in long-term inflation expectations in tomorrow's UMich report, as a higher reading might suggest that inflation expectations are becoming un-anchored.
