Yesterday, the Fed kept interest rates unchanged as expected but that's not what the market was looking for going into the event. The market was focused solely on the Dot Plot and the Fed decided to validate the market's dovish pricing projecting a 2024 year-end peak rate at 4.6%. The expectations were for the Fed to keep two rate cuts for 2024, but the Fed decided to increase that to three, basically agreeing with the market that rate cuts are coming.
Moreover, Fed Chair Powell didn't push back against the strong dovish pricing and even said that they are focused on not making the mistake of holding rates high for too long, which suggests that a rate cut could come pretty soon. This gave a strong boost to the Nasdaq Composite leading to new highs with the sentiment turning heavily bullish.
Nasdaq Composite Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Nasdaq Composite yesterday extended the rally to new highs following the Fed’s pivot. It’s never a good idea to chase the price, especially when there’s lots of FOMO in the market, so the buyers might want to wait for a pullback first before taking new positions.
Nasdaq Composite Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the breakout above the cycle high is diverging with the MACD. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we have a trendline connecting the most recent swing lows and the buyers might want to lean on it as they will also find the red 21 moving average for confluence.
Nasdaq Composite Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have another minor trendline with a steeper slope. More aggressive buyers might want to lean on it as they will also have the red 21 moving average for confluence. More conservative buyers might want to wait for a deeper pullback into the major trendline where we have also the 50% Fibonacci retracement level. Alternatively, the buyers could split their position in half and enter at both the trendlines to avoid missing out on an eventual rally. The sellers, on the other hand, will likely pile in at every break lower with a break below the major trendline triggering a stronger selloff into the 14050 support.
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Today we will see the latest US Retail Sales and Jobless Claims figures, while tomorrow we conclude the week with the US PMIs.
