Yesterday, the US ISM Services PMI beat expectations by a big margin and caused a selloff in the Nasdaq Composite. The market pricing for future interest rates expectations turned a little bit more hawkish with basically a 50/50 chance of another hike in November and less rates cuts in 2024. Last week we got a “bad news is good news” type of reaction, while yesterday it was the complete opposite as “good news was bad news”. It looks like the market is still trading on interest rates expectations.
Nasdaq Composite Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Nasdaq Composite tested the broken trendline and fell into the previous resistance turned support where we have also the confluence with the red 21 moving average. We should get a bounce here, but a lot will depend on the data going forward.
Nasdaq Composite Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more clearly the strong support zone where we can find many confluences. In fact, there’s the daily and the 4-hour red 21 moving average and the 38.2% Fibonacci retracement level. This is where the buyers should pile in with a defined risk below the support to target another higher high. The sellers, on the other hand, will want to see the price breaking lower to invalidate the bullish setup and position for a selloff into the 13174 support.
Nasdaq Composite Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we had a divergence with the MACD around the trendline which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we are still in the pullback territory, but if the price continues lower and breaks through the support and the upward trendline, then we will have a confirmation of a reversal and the sellers will regain control.
Today we will have the last important US economic data for this week: the US Jobless Claims report. We saw just yesterday that the market doesn’t like strong US data as that raises the chances that the Fed might need to do more and eventually lead to a worse recession. So, if we get good data, we should see more weakness in the Nasdaq Composite, while bad data should provide a relief rally. At some point though, the market should start to worry about bad data as well.