It looks like the more hawkish than expected FOMC Dot Plot last
week was kind of a wakeup call for the market as it’s been selling off with
almost no pullback ever since. The resilience in the economy is keeping the Fed
on the hawkish camp as it wants to see more weakness in the data, especially on
the labour market front. We’ve seen a huge rally since the lows back in October
2022 as the market continued to see a soft landing but even Fed Chair Powell said
that it’s not his base case, although they are aiming for it. With so many
bearish drivers that accumulated throughout the first half of 2023, the market
might be at risk of a major fall now.
Nasdaq Composite Technical
Analysis – Daily Timeframe
Nasdaq Composite Daily
On the daily chart, we can see that the Nasdaq
Composite is taking a breather after breaking below the key support around
the 13174 level where we had the confluence with the
trendline and the
38.2% Fibonacci retracement level.
The risk of further downside remains very high though and the sellers will keep
on piling in around these levels.
Nasdaq Composite Technical
Analysis – 4 hour Timeframe
Nasdaq Composite 4 hour
On the 4 hour chart, we can see more closely the
key support now turned resistance and the
small rally yesterday to retest the broken zone. Will this turn into the
classic “break and retest pattern”? The buyers will need the price to break
back above the resistance with conviction to start piling in and target the
highs.
Nasdaq Composite Technical
Analysis – 1 hour Timeframe
Nasdaq Composite 1 hour
On the 1 hour chart, we can see that the
price is diverging with
the MACD which
is generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, we might see a pullback into the trendline and the
38.2% Fibonacci retracement level where the sellers should pile in with a
defined risk above the trendline and target the 12274 support. The buyers, on
the other hand, will want to see the price breaking above the trendline to pile
in and position for a rally into the previous highs.
Upcoming
Events
Today the main event will be the US Jobless Claims
report. At this point, looks like there’s not much difference if it’s strong or
weak data as the former would keep the Fed hawkish and even raise the risk of
higher rates, while the latter might point to a recession. Nonetheless, the
last time the market rallied on weak data as it decreased the risk of further
tightening and brought down Treasury yields. Tomorrow, we will see the latest
US PCE data which is unlikely to change much in terms of market pricing unless
we see some big surprises.