Last Friday, the market sold off as the University of Michigan Consumer Sentiment report saw a big miss across the board with the inflation expectations figures spiking back up. This might be a signal that the consumers are indeed weakening, and it could be a bad omen for the broad market. Moreover, we got some defensive positioning into the weekend as there were some expectations that Israel could start a ground offensive in Gaza and that could have led Iran to join Hamas with uglier scenarios becoming likely from that point onwards.

The actual events fell short of expectations as we haven’t got a ground operation and, although we got mixed signals, it seems like Iran is not intentioned to join this war. This could lead to a relief rally and the technical levels can help in identifying the likely entry and exit points.

Nasdaq Composite Technical Analysis – Daily Timeframe

Nasdaq Composite Technical Analysis
Nasdaq Composite Daily

On the daily chart, we can see that the Nasdaq Composite last Friday fell into the upward trendline where we have also the confluence with the red 21 moving average. This is where we can expect the buyers to step in with a defined risk below the trendline to position for another rally into the major downward trendline around the 13800 level.

Nasdaq Composite Technical Analysis – 4 hour Timeframe

Nasdaq Composite Technical Analysis
Nasdaq Composite 4 hour

On the 4 hour chart, we can see more closely the support zone around the 13370 level where we have further confluence from the red 21 moving average, the 50% Fibonacci retracement level and the previous resistance turned support. This is a very good level for the buyers to position for a rally. If the price breaks lower, the bullish setup would be invalidated, and the sellers will likely pile in even more aggressively to extend the drop into the lows and target a complete breakdown.

Nasdaq Composite Technical Analysis – 1 hour Timeframe

Nasdaq Composite Technical Analysis
Nasdaq Composite 1 hour

On the 1 hour chart, we can see that more conservative buyers might want to wait for the price to break above the counter-trendline to join the rally into the major downward trendline, while the sellers could use it to target the break below the 13370 support with a better risk to reward setup.

Upcoming Events

This week is a bit empty on the data front. Tomorrow we will get the US Retail Sales data and it will be interesting to see if the worse consumers’ sentiment translated into weaker spending. On Thursday, we will see another US Jobless Claims report where the market will want to see if the miss in Continuing Claims last week was just a blip or something is starting to deteriorate in the labour market. On the same day we will also hear from Fed Chair Powell with the market being attentive to any type of signal on the upcoming rate decision.