Nasdaq 100: further attempts at recovering Tuesday’s losses

[MongiIG]

Dive into the latest moves in the tech-heavy index following a slight pullback in yields and gains for heavyweight Nvidia.

 

Source: Bloomberg

 

Indices Shares Federal Reserve Inflation Nasdaq Price

Written by: Monte Safieddine | Market analyst, Dubai

 

Publication date: Thursday 15 February 2024 07:27

Light on data, Fed comments, and a slight pullback in yields

There was little to process in terms of economic data out of the US, with the weekly mortgage applications from the MBA falling 2.3%. This shift meant attention was focused on Federal Reserve (Fed) members speaking. The Fed's Barr discussed the potential "bumpy" path to their 2% inflation target following Tuesday’s higher CPI (Consumer Price Index) readings, stating it's "very early to say whether we end up with a soft landing or not". Goolsbee expressed opposition to "waiting until inflation on a 12-month basis has already reached 2% before beginning to cut rates".

As for Treasury yields, they closed the session lower, reversing some of Tuesday's gains and falling back in real terms, which is seen as a positive for risk appetite. Breakeven inflation rates edged slightly higher, and market pricing (CME's FedWatch) anticipates the US central bank will maintain its current policy in May, even if by a slim majority that isn’t too far from a coin toss.

More Fed members are scheduled to speak today, alongside the 10-year TIPS auction, but there's also a significant amount of US data on the docket, including retail sales for January, which are forecasted to show a slight contraction. Important data is also expected tomorrow with producer prices and the University of Michigan's (UoM) preliminary readings for consumer sentiment and inflation expectations.

Sector performance places tech near the top, Nvidia overtakes Alphabet

Most sectors concluded yesterday's session positively, with industrials leading, closely followed by communications, technology, and consumer discretionary. This resulted in gains for the tech-heavy Nasdaq 100, which outperformed both the S&P 500 and Dow 30 for the session.

By the close, component performance saw Illumina and Netflix leading, with AMD close behind. On the other end, Kraft Heinz suffered the most due to a revenue miss, and after hours, Cisco's cautious guidance sent its share price tumbling. It was a session where Nvidia surpassed Alphabet to become the third most valuable company on the US stock market, with notable gains for other major players like Meta and Tesla.

Nasdaq technical analysis, overview, strategies, and levels

Price eventually settled above Wednesday’s daily 2nd Resistance level favoring conformist buy-breakouts and stopping out contrarian sell-after-reversals, but that hasn’t meant caution on pullbacks in price after what was witnessed last Tuesday even if the catalyst then was a significant fundamental event. The technical overview remains ‘bull average’ in both daily and weekly time frames.

 

Source: IG

IG client* and CoT** sentiment for the Nasdaq

In terms of sentiment, retail traders are predominantly short, having reduced their sell bias to 63% rather than increasing it as is typical following significant price gains. They started the week with a substantial 70% sell bias, with some traders exiting their short positions after last Tuesday's price drop.

Since then, they have been cautious about selling into price gains. In contrast, CoT speculators hold a majority buy position. The latest positioning data indicates they are choosing to decrease their long bias at these price levels.

 

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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