Amidst a tumultuous start to 2024, the Nasdaq 100 Index (CME: NQ) plunged this week, facing a steep decline of 2.64%, as lingering concerns surrounding the Federal Reserve’s potential rate cuts timeline weighed heavily on market sentiment.
The Fed’s December meeting minutes offered little clarity on the expected timeline for rate adjustments, exacerbating investor uncertainty. While acknowledging inflationary control, policymakers remained vague about the commencement of rate cuts and kept mum on the timing of cuts. This lack of transparency triggered extended profit-taking from 2023’s rally, notably affecting rate-sensitive mega-cap stocks like Nvidia (NVDA), Apple (AAPL), and Tesla (TSLA), which witnessed declines between 0.7% and 4%.
The 4-hour chart paints a grim picture. Price action languishes well below its key moving averages (20-SMA, 50-SMA, 100-SMA), with the 20-SMA (green line) recently breaking below the 50-SMA (blue line) and 100-SMA (orange line) in a bearish death cross. The oversold RSI (19.12) suggests a potential short-term bounce, but the overall trend remains in favour of the downward.
A sustained push lower could offer trading opportunities towards the 16,455.75 support level, with a break below the level likely to open the door for further declines, with 16,331.50 the next significant level in the crosshairs. A retracement could offer short-term trading opportunities towards the 16,661.00 resistance, with potential for further upside towards 16,769.75 and 16,866.50 if momentum picks up.
The Nasdaq’s slump reflects a confluence of bearish forces – Fed ambiguity, profit-taking, and technical breakdown. While oversold conditions hint at a potential bounce, the overall downtrend remains firmly in place. Should bulls muster strength, the 16,661.00 resistance could offer a modest rebound target. However, a break below 16,455.75 support potentially risks accelerating the decline towards 16,331.50.
Sources: TradingView, Trading Economics, Federal Reserve, MarketWatch, Reuters, Dow Jones Newswire.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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