The last week was incredible for the Nasdaq Composite with the index rallying for five consecutive trading days. The bulk of the rally came after the FOMC rate decision where the Fed left interest rates unchanged and Fed Chair Powell delivered less hawkish than expected remarks. The Nasdaq Composite then extended the gains into the weekend after the NFP report missed forecasts and the ISM Services PMI came lower than expected.
One may think that the stock market sees a soft landing and the fall in Treasury yields is a good thing. Unfortunately, Treasury yields fell likely because the bond market sees more weakness to come in the next few months given the softening in the labour market. So, the rally we’ve seen out of the disappointing data is likely to be misplaced and the market might correct that soon.
Nasdaq Composite Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Nasdaq Composite erased most of the losses of the past two weeks and reached the key trendline around the 13450 level. We can notice that the price is now overstretched as depicted by the distance from the blue 8 moving average. In such instances, we can generally see a pullback into the moving average or some consolidation before the next move.
Nasdaq Composite Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we got some selling into the close before the weekend. We can also notice that the price is overstretched even on this timeframe. The sellers are likely to step in with a defined risk above the high to position for a drop back into the 13174 support. The buyers, on the other hand, will be better off to wait for a pullback instead of chasing the rally at these levels.
Nasdaq Composite Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a nice support zone around the 13174 level where we can find the confluence with the upward trendline, the red 21 moving average and the 38.2% Fibonacci retracement level. This is where the buyers are likely to pile in with a defined risk below the trendline to position for a break above the major trendline. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets and target a new low.
This week is pretty empty on the data front with just the US Jobless Claims on Thursday and the University of Michigan Consumer Sentiment on Friday. The market is likely to focus on the past week events and will be eager to see the US Jobless Claims on Thursday given the recent weakness in the labour market data.