FUNDAMENTAL
OVERVIEW
The Nasdaq sold off
yesterday after early reports suggested the third round of US–Iran talks had
broken down, with Iran reportedly rejecting US demands. Later in the day,
however, new headlines indicated that the discussions had actually made
significant progress and that another round was scheduled for next week. This
kind of back-and-forth on the macro and geopolitical front is keeping most
markets rangebound.
Right now, the main risks
for the Nasdaq are a potential US–Iran military escalation and a hawkish
repricing of Fed interest rate expectations.
On the rates side, the
market is still pricing in about 57 bps of easing by year-end. This outlook could
be at risk of a hawkish repricing on further improvement in the US labour
market data. In fact, Fed Governor Waller said that he would consider holding
rates steady if we see another strong NFP report like January’s. That makes
next Friday’s data especially important as solid numbers could weigh on
equities in the short term as traders dial back expectations for rate cuts.
The bigger risk, though, is
geopolitical. If a military conflict between the US and Iran were to break out,
oil prices would likely surge. That would represent a negative shock to the
global economy and raise stagflation concerns. The initial market reaction
would almost certainly be a sharp move toward risk aversion, with equities
selling off hard as growth expectations deteriorate.
To sum up, there are lots
of downside risks at the moment with little reasons for a rally into new
all-time highs. The macro backdrop remains broadly supportive, with easing
inflation and a resilient labour market, but that picture could shift quickly. Traders
will need to stay nimble.
NASDAQ TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On
the daily chart, we can see the
Nasdaq has been trading in a wide range
since October of last year. Such long consolidations generally lead to big
trending moves once the price breaks out. Until then, the market participants
will continue to play the range.
NASDAQ TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On
the 4 hour chart, we got a
breakout of the 24,700-25,127 range on Wednesday, but all the gains were eventually
pared back yesterday on the US-Iran tensions. We now have an upward trendline defining
the bullish structure on this timeframe. The buyers will likely lean on the
trendline with a defined risk below the 24,700 support to keep pushing into new
highs, while the sellers will look for a break below the trendline and the
support to increase the bearish bets into the 24,200 level next.
NASDAQ TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, there’s
not much we can add here as the buyers will have a better risk to reward setup
around the trendline and the 24,700 support, but another break above the 25,127
could see the buyers piling in for a move back into the 25,500 level. The
sellers, on the other hand, will likely step in around the 25,127 level with a
defined risk above it to position for a break below the trendline
