The Nasdaq 100 (CME: NQ) is mirroring the cautious sentiment gripping the broader U.S. market as investors await key data releases and navigate mixed signals from the Federal Reserve. Despite a strong first quarter fuelled by artificial intelligence and hopes of rate cuts, the index is currently trading flat, lagging behind the Dow and S&P 500.
Economic data releases, including consumer sentiment surveys, are on tap, but the main focus remains on the Personal Consumption Expenditures Price Index (PCE) due Friday. This key inflation gauge will influence the Fed’s policy trajectory, with a surprise rise potentially dampening enthusiasm for early rate cuts. Fed Governor Waller’s recent comments advocating for holding off on rate cuts due to stubbornly high inflation further clouded the outlook.
Technical Analysis
The 4-hour chart shows that The Nasdaq 100 (CME: NQ) is currently at 18,493.25, reflecting a wait-and-see approach from market participants. The price action recently dipped below the 20-SMA (green line), indicating a shift in short-term momentum towards the neutral zone. However, it remains above the 50-SMA (blue line) and 100-SMA (orange line), suggesting a longer-term bullish bias. The downward-sloping 20-SMA approaching the upward-sloping 50-SMA and 100-SMA highlights the current cautiousness.
The RSI (49.71) sits flat near the 50.00 level, mirroring the overall lack of direction. A break back above the 20-SMA could trigger a potential retest of the all-time high of 18,709.00. A decisive break above this resistance could open doors to uncharted territory, with Fibonacci extensions at 18,863.00 (23.60%) and 18,958.00 (32.80%) as potential upside targets.
Conversely, a decline that breaches the 50-SMA would expose the 23.60% Fibonacci retracement level at 18,358.00 as initial support. A further decline below this level could bring the 38.20% (18,140.75) and 50.00% (17,965.25) Fibonacci retracement levels into play.
Summary
The upcoming data, particularly the PCE report, will be crucial in shaping market sentiment and the Fed’s policy direction. The Nasdaq 100 finds itself at a crossroads, with a potential retest of the all-time high on the table if bulls regain control. However, a dovish Fed stance or a hotter-than-expected inflation print could trigger a pullback.
Sources: TradingView, Trading Economics, Reuters, U.S. Bureau of Economic Analysis.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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