The Nasdaq 100 Index (CME: NQ) treads water, cautiously optimistic ahead of Friday’s crucial Nonfarm Payroll (NFP) report. Recent economic data paints a mixed picture, with a strong ADP jobs number fuelling fears of persistent inflation and potentially delaying the Fed’s rate cuts. This has weighed on the index, evident in the Dow’s three-day losing streak.
However, a glimmer of hope emerged on Thursday as futures markets nudged slightly higher. Positive comments from Atlanta Fed President Bostic, hinting at a possible rate cut later this year, counterbalanced some of Chairman Powell’s hawkish rhetoric. Investors remain divided, with money markets currently pricing in a near 59% chance of a rate cut in June. This is a significant drop from 70% a week ago, highlighting the evolving market sentiment.
Technical Analysis
The Nasdaq 100’s 4-hour chart reflects this indecision. The price sits at 18,454.75, trading above the key 100-SMA (orange line) and 200-SMA (red line) but held back by the 50-SMA (blue line). This confirms the current cautiousness.
The upward-sloping RSI (53.40) above 50 indicates underlying bullish momentum, but a sustained break above the 50-SMA is needed to confirm a potential retest of the all-time high at 18,709.00. A decisive break above this resistance could propel the index towards uncharted territory, with Fibonacci extensions at 18,863.00 and 18,958.00 as potential upside targets.
However, bears shouldn’t be ignored. A drop below the 100-SMA exposes the 23.60% Fibonacci retracement level (18,140.75) as initial support. A breach here could trigger a cascade of selling, dragging the price towards the 38.20% Fibonacci retracement level (17,965.25) and potentially the 50.00% level (17,789.75).
Summary
The Nasdaq 100 finds itself in a cautious pattern, awaiting the NFP data’s verdict on inflation and the Fed’s monetary policy trajectory. Friday’s report will be instrumental in determining if the bulls can muster the strength to overcome the resistance at the 50-SMA and potentially retest the all-time highs or if the bears will gain control and drag the index lower.
Sources: TradingView, Simply Wall Street, MarketWatch, Dow Jones Newswire, CNBC.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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