Yesterday, the Nasdaq Composite finished the day positive as a big drop in the price index in the ISM Services PMI turned the sentiment around and quelled some inflation fears. In fact, the market stayed under pressure since the hot ISM Manufacturing PMI on Monday as the increase in the price index renewed fears of a reacceleration in inflation. For now, the market might take a sigh of relief, but all eyes then will turn on the US CPI report next Wednesday.
Nasdaq Composite Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Nasdaq Composite has been diverging with the MACD for a long time. This is generally a sign of weakening momentum often followed by pullbacks or reversals. The price recently broke out of the rising wedge and bounced on the key 16206 level where we had also the red 21 moving average for confluence. This is a critical support zone as a continuation to the downside should trigger a major correction with the 14500 level as the ultimate target.
Nasdaq Composite Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price bounced on the 16206 level where we had also the 61.8% Fibonacci retracement level for confluence. The buyers stepped in with a defined risk below the Fibonacci level to position for a rally into a new all-time high, but they will need the price to rise back above the trendline to increase the momentum. The sellers, on the other hand, will want to see the price reversing and breaking below the Fibonacci level to pile in more aggressively into new lows.
Nasdaq Composite Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the recent price action with the strong bounce yesterday following the ISM Services PMI release. We can see that we have a counter-trendline that acted as resistance lately. If the price were to break above this counter-trendline, we can expect the buyers to increase the bullish bets into a new all-time high. The sellers, on the other hand, will likely lean on the counter-trendline to position for a break below the Fibonacci level with a better risk to reward setup.
Upcoming Events
Today we will see the latest US Jobless Claims figures, while tomorrow we conclude the week with the US NFP report.
