The Nasdaq 100 Index (CME: NQ) treads water ahead of the Federal Open Market Committee (FOMC) meeting on Wednesday, currently on track to snap a two-week losing streak. The index is up 0.65% for the week despite trading relatively flat today. Investor sentiment remains cautious as the Fed’s policy decision looms large.
While a rate hike is not anticipated, the FOMC’s economic projections and commentary from Chair Jerome Powell could influence the near-term trajectory of the Nasdaq 100. Recent robust inflation data has tempered expectations of aggressive rate cuts this year. The CME Fedwatch Tool now suggests a 55.2% probability of the first rate cut coming in June, down from 71% a week ago.
Despite the cautious undercurrent, the technology sector remains a bright spot. News of Nvidia’s new AI chip, the Blackwell B200, and Apple’s potential integration of Google’s Gemini AI engine into iPhones fuelled optimism in the sector. Alphabet (GOOG) surged 4.44% yesterday, reflecting this positive sentiment. However, some profit-taking may be underway, with Nvidia (NVDA) struggling pre-market.
Technical
The 4-hour chart reveals a technically precarious situation for the Nasdaq 100. The index (18,181.25) is currently trading around the 100-SMA (orange line) just below the 20-SMA (green line) and 50-SMA (blue line), with the 20-SMA recently breaching below the 50-SMA.
This bearish crossover on the short-term moving averages suggests a potential downside bias, with the 38.20% Fibonacci retracement level (18,129.75) acting as a key support level in the coming sessions. A sustained break below the initial support at the 38.20% Fibonacci retracement level could see a further decline towards the 50.00% and 61.80% Fibonacci retracement levels (17,956.50 and 17,783.00), respectively.
However, a potential bullish reversal is not out of the question. If the index finds support around the 38.20% level, a bounce towards the 23.60% Fibonacci retracement level (18,344.50) could occur. Conversely, a decisive break above the 23.60% Fibonacci retracement level may signal a bullish reversal, offering trading opportunities towards the resistance levels at 18,499.00 and the recent all-time high of 18,691.25.
Summary
The Nasdaq 100 finds itself at a crossroads. While positive developments in the technology sector provide a temporary boost, the upcoming Fed decision injects uncertainty. The technical analysis on the 4-hour chart underscores this cautious stance. A break below the 38.20% Fibonacci retracement level opens the door for further downside, while a bounce and a break above the 23.60% level could signal a short-term bullish reversal.
Sources: TradingView, Trading Economics, Reuters, News24.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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