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Nasdaq 100 Switches Google Rally for Facebook Collapse, Heavy EURUSD Risk Ahead

Nasdaq 100 Switches Google Rally for Facebook Collapse, Heavy EURUSD Risk Ahead

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QQQ Nasdaq 100 ETF, Facebook, Dollar, EURUSD and GBPUSD Talking Points

  • The Trade Perspective: QQQ bearish below 365; EURUSD below above 1.1350 and bearish below 1.1200; USDJPY bearish below 113.75
  • The QQQ Nasdaq 100 ETF struggled to translate Google’s strong bullish gap into progress, does that stage a more severe response to Facebook’s expected gap down post-earnings?
  • Event risk picks up sharply through Thursday’s session with the ECB and BOE rate decision offering explicit fundamental risk while the ISM services survey and AMZN earnings pose their own risk
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When Risk Appetite Isn’t Spurred by Bullish Event Risk, Is It a Bear Market?

The markets were positioned for a ‘risk on’ this past session, but the enthusiasm just wouldn’t catch. That begs the question: are we just more prone to a speculative unwind? While we were facing a fundamental lull through Wednesday’s trading session, the prevailing winds this week have been noticeably bullish and there was a very tangible event-based motivation for the willing dip-buyers to capitalize on. Google earnings released after the close Tuesday were nothing short of extraordinary (an EPS of $30.58 that beat $34.46 expectations on just over $75 billion in revenue), but that ultimately wouldn’t budge the QQQ Nasdaq 100 ETF beyond a modest bullish gap. In the most rudimentary assessment of markets, when favorable news can’t rouse the bulls but disappointing news drives a bearish response, you have a ‘bearish market’. We are about to put that disparity to the test with Thursday’s session. Though a ‘lesser FAANG member’ in my opinion, Facebook (now Meta) reported a significant shortfall in its Q4 reporting and disappointed with its Q1 forecasts. FB shares collapsed over -20 percent in afterhours trade. If the QQQs follow this move more readily than GOOG, it will be difficult to miss the preference.

Chart of Facebook with 100-Day Mov Avg and After-Hours Change Overlaid with QQQ (Daily)

Chart Created on Tradingview Platform

Speaking of the Nasdaq 100, the ‘growth’ favored, tech index managed to recovery a close above its 200-day moving average and the ‘technical correction’ (10 percent retreat from all-time highs) this past session. The move that earned this ground, however, was certainly uninspiring. When gauging ‘risk trends’, I like to look at the peak of speculative appetite to see how it drive the broader sentiment in the financial system. This week, the Nasdaq-to-Dow ratio returned to its 200-day moving average but hasn’t really put out the fire in the growth-to-value bearish slide since November. Important for my risk assessment through the end of this week is whether the tech index manages to hold above its 200-day SMA. If it slides back below the frequented level, it will be a loaded range based move on a lower high. The implications would stretch far further than just the QQQ.

Chart of QQQ Nasdaq 100 ETF with 20-Day SMA, Volume and 10-Day ATR (Daily)

Chart Created on Tradingview Platform

Event Risk Picks Up Significantly Through Thursday and Friday

Wednesday was a low point for scheduled event risk on a global macro scale. Such lulls are defined by significant peaks around the quiet. We are heading into some serious fundamental swamp over these final two trading days of the week. Before touching upon what lies ahead, it is worth taking stock of the important data behind us. I already touched upon the Facebook earnings and what it can translate into for generalized risk trends. From the more generic economic data, the US ADP private payrolls and Eurozone CPI updates were the most notable listings. For the jobs report, the data is a very poor indicator for the official NFPs that finds update Friday, but the -301k report is so significant a miss that it will stir expectations. As for Europe’s inflation update, a record high headline figure will certainly set expectations very high for the upcoming ECB decision; but it will be very hard to live up to the kind of expectations the markets are pricing in.

Calendar of Top Macro Economic Event Risk for the Week Ahead

Calendar Created by John Kicklighter

In thematic terms, monetary policy remains the most persistent fundamental driver for the global macros docket -both in terms of scheduled central bank meetings and data readily interpreted for its influence on decision making. This past session’s European CPI release bolstered ECB expectations such that a rate hike (10bp) is now priced in for July. That is particularly aggressive for a central bank that is known for its efforts to quash any hawkish interpretations. Another unusual rate speculation outlet ahead is the ISM service sector activity report. The manufacturing reading disappointed on the headline but significantly beat on its employment and inflation components – the aspects that make up the Fed’s dual mandate. If we get the same from the services component of the US economy, it will be hard to miss the implications for a more aggressive Fed in the short-term and through 2022.

Relative Monetary Policy Standing of Major Central Banks

Chart Created by John Kicklighter with Data from Swaps

Top Event Risk Thursday: The ECB and BOE Rate Decisions

While the ISM service sector report carries serious implications for the world’s largest economy, the greater market moving potential rests with the two benchmark central bank rate decisions on tap – in my opinion. For the European Central Bank (ECB) decision, there is little-to-no chance of a change in the benchmark rates, but the press conference will either attempt to smother the burgeoning rate speculation or allow it to set the standard for forecasts. The past three days’ charge suggests that the July forecast for the first hike has been partially priced in by the market, but I still believe a planned allowance of this speculation to persist would be the bigger surprise. In other words, a less dovish outcome would generate the more significant market movement. I like to be prepared for either scenario, so a 1.1350 break or 1.1200 bearish reversal both have their merits so long as the market looks to have intent.

EUR/USD Bearish
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 8% -15% -3%
Weekly 35% -23% 4%
What does it mean for price action?
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Chart of EURUSD with 100-Day SMA Overlaid with German-US 2-Year Spread (Daily)

Chart Created on Tradingview Platform

The more loaded of the two major central bank announcements Thursday will be the Bank of England (BOE) rate decision. We are heading into the event with the markets pricing in a 25 basis point rate hike at this particular gathering. That would be an aggressive tempo relative to the Fed and many other peers. That said, the Sterling really hasn’t benefit the anticipation. Outside of GBPUSD where the Dollar has proved a very disruptive force, the Pound really hasn’t gained serious traction against many of its other counterparts. That makes for difficult read on whether the currency could perform better in a hawkish (read bullish) or dovish (bearish) scenario. I prefer bearish as the technicals are more accommodative to the range.

GBP/USD Mixed
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -8% 1% -4%
Weekly 19% -13% 3%
What does it mean for price action?
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Chart of GBPUSD with 200-Day SMA Overlaid with UK-US 2-Year (Daily)

Chart Created on Tradingview Platform

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