The Nasdaq 100 Index Futures (CME: NQ) navigates a choppy post-FOMC meeting landscape after declining over 1.7% in the Wednesday trading session. This volatility reflects the market’s cautious response to the Federal Reserve’s (Fed) stance on interest rates.
The Fed’s decision to hold rates steady was expected, but Chair Powell’s hawkish comments regarding potential rate cuts dampened investor enthusiasm. While acknowledging progress on inflation, the Fed emphasized the need for “greater confidence” before considering rate cuts. This pushed back hopes for a March cut, currently priced in at 46% by the CME FedWatch tool.
Despite the Fed’s cautiousness, some positive signs emerge. Inflation continues to cool, and economic growth remains solid. Additionally, the Fed removed “additional policy firming” from its statement, suggesting a potential shift towards a more neutral stance. This, coupled with the possibility of rate cuts later this year (over 65% chance priced in), offers a glimmer of hope for growth-oriented indices like the Nasdaq.
However, headwinds persist. Disappointing US data, regional banking concerns, and upcoming key earnings reports from Apple, Amazon, and Meta add to the uncertainty.
Technical
The 4-hour chart shows that the index is currently trading flat at 17,312.50, seemingly finding temporary support at the 100-SMA (orange line) after breaking below the 20-SMA (green line) and 50-SMA (blue line). This technical breakdown suggests potential weakness. The Relative Strength Index (RSI) sits at 37.00, indicating neither overbought nor oversold territory. However, its downward trend from above 50 points towards potential bearish momentum.
With the finding support at the 100-SMA, it could offer short-term trading opportunities towards the 23.60% Fibonacci retracement level (17,449.00). A break above the initial resistance would offer short-term trading opportunities towards the 17,587.50 and 17,793.50 resistance levels.
However, a beak below the 100-SMA and 38.20% Fibonacci retracement level could offer short-term trading opportunities towards the 50.00% Fibonacci retracement level (17,064.00) lower. A break below the initial support would bring the 61.80% Fibonacci retracement level (16,891.75) into play in the short term.
Summary
The NQ’s outlook remains uncertain, caught between hawkish Fed signals and mixed economic data. The technical picture is bearish, with key moving averages crossed and weak momentum. Short-term trading opportunities exist on both sides, with potential resistance at the 23.60% Fibonacci level and support at the 100-SMA and 38.20% Fibonacci level. However, a break below the 100-SMA could trigger further downside towards the 50.00% Fibonacci level.
Sources: TradingView, Trading Economics, Reuters, Dow Jones Newswire, Federal Reserve.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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