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Nasdaq 100 Rips as Investor Sentiment Brightens, Core PCE Eyed for Market Direction

Nasdaq 100 Rips as Investor Sentiment Brightens, Core PCE Eyed for Market Direction

Diego Colman, Strategist

US STOCKS OUTLOOK:

  • S&P 500 jumps almost 2%, Nasdaq 100 leads gains on Wall Street, soaring 2.8%
  • U.S. April PCE data will be the center of attention on Friday
  • This article looks at the key technical levels to watch for in the Nasdaq 100 over the next few days

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Most Read: S&P 500 Rallies as Traders Bet on Potential FOMC Pause in September

U.S. stocks soared on Thursday, extending gains from the previous session as dip buyers pounced to pick up beaten down shares on hopes that the worst of the recent sell-off is over. At the closing bell, the S&P 500 climbed 1.99% to 4,057, its highest close since May 17, with the consumer discretionary sector driving the surge following solid earnings from Macy’s, Dollar Tree and Dollar General. For its part, the Nasdaq 100 led the upswing among major averages, jumping 2.79% to 12,276, boosted by Tesla, Amazon, and Meta’s solid daily performance.

While the rally is welcome, the move could be attributed in part to month-end portfolio rebalancing rather than a change in the underlying trend - after all, economic headwinds have not disappeared overnight. By way of context, several banks have indicated that large funds could be purchasing between $34 billion and $56 billion worth of equities heading into the May close to meet asset allocation targets in the wake of Wall Street's recent downturn. It is also possible that the bullish move was amplified by thinner liquidity conditions ahead of the Memorial Day Holiday.

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Looking ahead, Core Personal Consumer Expenditures Price Index, the Fed's favorite inflation gauge,will be the highlight of the U.S. economic calendar on Friday. For sentiment to continue to improve, the data will have to show that inflationary pressures peaked in the first quarter and have begun to cool at a rapid pace.

We’ll know tomorrow whether the slowdown in inflation was significant last month, but consensus forecasts point to April core CPI easing to 4.9% y/y from 5.2% y/y in March (the lower the number, the better for tech stocks and the Nasdaq 100). Given that this is a high-impact report, it could spark strong volatility before the weekend, especially if the results surprise relative to expectations, with low trading volume possibly magnifying price swings.

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NASDAQ 100 TECHNICAL ANALYSIS

The Nasdaq 100 extended its advance on Thursday, buoyed by broad-based positive sentiment after certain US retailers posted strong earnings. After all the twists and turns, the tech index managed to break and close above a key resistance at 12,250, a sign that bullish momentum is picking up. To be confident this isn’t another dead-cat bounce, follow-through to the topside will be required in the coming sessions. On that note, if we see more gains, the next hurdle appears at 12,600. On further strength, the focus shifts upwards to the psychological 13,000 level.

On the other hand, if sellers return to fade the rip, as has happened several times during this bear market, initial support rests at 12,250, followed by 11,492, the 2022 lows.

NASDAQ 100 TECHNICAL CHART

Nasdaq 100 technical chart

Nasdaq 100 Chart Prepared Using TradingView

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---Written by Diego Colman, Market Strategist for DailyFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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