Yesterday, the US ISM Services PMI far exceeded expectations and prompted a sell-off in the Nasdaq Composite. Market prices for future interest rate expectations have become a little more hawkish, with a 50/50 chance of another rise in November and fewer rate cuts in 2024. Last week we have had a reaction of “bad news is good news”, whereas yesterday it was quite the opposite: “good news was bad news”. It appears that the market continues to trade based on interest rate expectations.
Nasdaq Composite Technical Analysis – Daily Timeline
Nasdaq Composite Daily
On the daily chart we can see that the Nasdaq Composite tested the broken trend line and fell into the previous resistance turned support where we also have the confluence with the red 21 moving average. We should get a bounce here but this will depend a lot on future data.
Nasdaq Composite Technical Analysis – 4 Hour Timeframe
Nasdaq Composite 4 hours
On the 4-hour chart, we see more clearly the strong support zone where we can find many confluences. In fact, there is the daily red 21 4-hour moving average and the 38.2% Fibonacci retracement level. This is where buyers should pile in with defined risk below support to aim for another higher high. Sellers, on the other hand, will want to see the price lower to invalidate the bullish setup and position themselves for a sell-off towards the 13174 support.
Nasdaq Composite Technical Analysis – One Hour Timeframe
Nasdaq Composite 1 hour
On the hourly chart, we can see that we had a divergence with the MACD around the trendline, which is usually a sign of weakening momentum, often followed by pullbacks or reversals. In this case, we are still in bearish territory, but if the price continues to decline and breaks through the support and the uptrend line, then we will have confirmation of a reversal and the sellers will regain control.
Events to come
Today we will have the latest important US economic data for this week: the US jobless claims report. We saw yesterday that the market does not appreciate strong US data, as it increases the risk that the Fed will have to do more and ultimately lead to an even deeper recession. So, if we get good data, we should see further weakness in the Nasdaq Composite, while bad data should bring relief. However, at some point, the market should also start worrying about bad data.
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