Latest price gains entice retail trader buys taking the majority long bias lower and closer to that of CoT speculators.
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FOMC holds rates, but what lies ahead?
The latest Federal Open Market Committee (FOMC) decision was to hold on rates again as anticipated, in its statement noting "strong pace" for third-quarter economic activity as well tighter financial conditions. Its Chairman Powell thereafter failed to give any indication on December’s decision.
Data disappointments: a 'bad news is good news' scenario
Prior to that was a plethora of US economic data that generally disappointed favoring the ‘bad news is good news’ theme.
- ADP’s (Automatic Data Processing) non-farm estimate for October a miss showing 113K growth compared to 149K forecasts
- The Institute for Supply Management's (ISM) Manufacturing Purchasing Managers' Index (PMI) for the same month deteriorated further into contracting territory, registering a reading of 46.7, down from the expected 49. There was a notable drop in new orders, which fell to 45.5, and its employment component also contracted, declining from 51.2 to 46.8
- The weekly mortgage applications out of MBA falling again with a -2.1% reading, and the exception
- Job openings out of JOLTS a beat at 9.55m for the month of September.
Treasury's quarterly refunding
There was also the Treasury’s quarterly refunding announcement where upcoming supply was lighter than anticipated and skewed away from the further end a sigh of relief for the bond market.
Yields drop and tech outperforms
The results from the above three sent Treasury yields notably lower, and so too in real terms. Another small pullback for breakeven inflation rates, and market pricing (CME's FedWatch) favors a hold from the Federal Reserve with a small minority expecting a hike. The first rate cut from current levels is anticipated by the majority for June of next year.
For the stock market, most sectors finished yesterday's session in the green. Thanks to the pullback in yields, tech, communication, and consumer discretionary sectors outperformed by a decent margin. These sectors are crucial for powering the tech-heavy Nasdaq 100 index, which had an outperforming finish against both the S&P 500 and Dow 30.
We've got the weekly claims, factory orders, and earnings from the heaviest component, Apple, today before attention shifts to the market-impacting non-farm payrolls tomorrow and services PMIs.
Nasdaq technical analysis, overview, strategies, and levels
The strong gains propelled the price past its previous 1st Resistance level, which initially held on a couple of occasions. This triggered and favored conformist sell-after-significant reversals before the subsequent moves eventually led it to its 2nd Resistance level, ultimately giving the contrarian buy-breakouts the upper hand. Price-indicator proximity indicates that minor shifts could impact key technical indicators significantly.
Additionally, a broad bear channel implies that if the price continues its ascent, it may occasionally deviate from the 'bear average' technical overview. This suggests ongoing caution for conformist strategies that involve selling into these gains.
IG client* and CoT** sentiment for the Nasdaq
As for sentiment, retail traders aren’t complaining given they held a majority buy 61% bias prior to the event, since then dropping to a slight long 54% as of this morning. They aren’t too far off CoT speculators according to last Friday’s report, who have themselves pulled back into slight buy territory.
Nasdaq chart with retail and institutional sentiment
- *The percentage of IG client accounts with positions in this market that are currently long or short. Calculated to the nearest 1%, as of today morning 8am for the outer circle. Inner circle is from the previous trading day.
- **CoT sentiment taken from the CFTC’s Commitment of Traders report, outer circle is latest report released on Friday with the positions as of last Tuesday, inner circle from the report prior.
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