Nasdaq 100: losses after FOMC hold as traders brace for key earnings

[MongiIG]

Retail traders' sell bias plummets, as fresh shorts get enticed into closing out, while longs initiate anticipating its bullish technical overview will hold.

 

Source: Bloomberg

 

Indices Federal Open Market Committee Nasdaq-100 Nasdaq Market sentiment Technical analysis

Written by: Monte Safieddine | Market analyst, Dubai | Publication date: Thursday 01 February 2024 07:31

FOMC hold, statement change, and Powell pushback

The Federal Open Market Committee (FOMC) opted to hold yesterday, as anticipated, but its statement was changed considerably, removing "additional policy firming" but wanting "greater confidence" that inflation is on track to reaching the central bank’s 2% target. In the press conference after, chairman Powell said he "doesn't think it's likely that the committee will reach a level of confidence by the time of the March meeting to identify March" as the time to cut interest rates, and wanting "the continuation of the good data we've been seeing." Market pricing (CME's FedWatch) is expecting a hold from their March meeting, and the first cut in the current cycle to start in May, but with a slight majority anticipating getting beneath 4% by the end of this year.

Disappointing US data, regional banking scare, and treasury’s announcement

US data generally disappointed yesterday, with ADP's non-farm estimate for the month of January a clear miss at 107K instead of 148K, Chicago PMI (Purchasing Managers’ Index) worsening to 46 and it too beneath forecasts, and the weekly mortgage applications out of MBA dropping 7.2%. The employment cost index for the fourth quarter dropped to 0.9% from 1.1%.

As for treasury yields, they finished the session lower, and this time in real terms as well. There were a few items to digest, with the general risk-off moves in the financial markets, some attention on regional banking shares in retreat following New York Community Bancorp’s surprise loss and dividend cut, and the US Treasury not expecting further increases in auction sizes in the several quarters after April.

There are a few items today, including ISM's (Institute for Supply Management) manufacturing prints, and then tomorrow’s (usually) market-moving Non-Farm Payrolls. In terms of notable earnings, expect the focus to be on Apple, Amazon, and Meta releasing their figures today. All three are components of the Nasdaq 100, and their combined weighting is over 20% of the index.

Nasdaq technical analysis, overview, strategies, and levels

All sectors finished yesterday's session in the red, with defensives lightest on losses, a nasty hit for communication, tech second from the bottom also hurting, and consumer discretionary not far off. The trio suffering meant an obvious red finish for the tech-heavy Nasdaq 100, that was worse than both Dow 30 and the S&P 500.

Its price already was beneath its previous 1st support level early yesterday (after Alphabet and AMD’s releases), and thereafter a move to its previous 2nd support favoring contrarian sell-breakouts. Overall, its technical overview remains ‘bull average’ on both daily and weekly time frames, but that doesn’t mean a lack of caution for conformist buys off key support levels, and more so with what’s in store over the next two days on the fundamental front.

 

Source: IG

IG client* and CoT** sentiment for the Nasdaq

As for sentiment, retail traders have fallen out of heavy sell territory from 67% yesterday to 62% as of this morning, as fresh shorts get further enticed into closing out and longs initiate. CoT speculators as of last Friday’s report are still majority to the buy side, at an exact opposite long 62%.

 

Source: IG

Nasdaq chart with retail and institutional sentiment

 

Source: IG

• _{*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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