Nasdaq 100 Talking Points:
- Nasdaq 100 erases early declines to sit in positive territory
- Potential “double bottom” pattern could signal a bottom
Following a stunning rout in US equities on Wednesday, major US benchmarks have eased the bleeding during Thursday’s session. The tech-heavy Nasdaq 100 is outperforming both the S&P 500 and Dow Jones, as a rally in US Treasury securities sees yields moving lower. Despite the small bounce, the Nasdaq 100 sits firmly underwater for the week, month, and year. With the market fully appreciating the Fed’s intended aim of lowering inflation, focus now shifts to a potential recession. While many across Wall Street do not see a recession as “base case” as of yet, recent price action suggests many are starting to worry.
Wednesday’s decline followed extremely hawkish remarks from Federal Reserve Chair Jerome Powell, who hinted that the bank was carving out an aggressive path towards neutral (potentially restrictive) monetary policy. Sentiment was not helped by Target, which revealed margins well below estimates and also slashed rest-of-year guidance. Often looked at as a proxy for the American consumer, retail names have been put through the woodchipper of late. Sentiment appears to be frayed, with economic data also starting to show signs of slowing activity. Thursday saw an upside surprise on initial jobless claims, with the tally coming in at 218k vs. 200k expected.
Nasdaq 100 Futures (NQ) 4 Hour Chart
Chart created with TradingView
Despite all this, the Nasdaq 100 may be in the process of carving out a potential reversal pattern in the form of a "double bottom." Price has so far clearly reversed twice around the 11730 level, which may offer bulls some relief as we look forward. Despite these two lows being cemented, NQ has yet to break back through resistance around 12600. Weakening risk sentiment and the looming threat of slowing growth represent serious obstacles for risk assets, not to mention the lingering fear of stagflation. Taking this into account, traders may want to be wary of this potential double bottom pattern. Bulls may want to see a sustained rally into the 13000 zone to determine whether to truly buy the dip or sell the rip.
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--- Written by Brendan Fagan, Intern
To contact Brendan, use the comments section below or @BrendanFaganFX on Twitter
