In a whirlwind of volatility, the Nasdaq100 Futures (CME: NQ) witnessed a rapid December surge followed by a dramatic downturn as bearish forces made precision strikes. This week alone, the index futures plummeted by 3.77%, signalling a tumultuous start. The sudden reversal was triggered by a global stock sell-off, fostering caution among investors and eroding prior optimism fuelled by anticipated interest rate cuts as soon as March 2024.
The market sentiment shift, notably evident in reduced bets on Federal Reserve rate cuts for March, declined from a 73.4% probability to 62.7% within a brief span. This sentiment sway gained momentum with stronger-than-expected ADP employment figures, signalling robustness in the US labour market.
As global investments pivot towards safer havens, the strengthened US dollar, coupled with declines in index futures, amplifies the market’s turbulence. The unexpected surge in Nonfarm payrolls, surpassing expectations at 216K, further weighs on the index futures, potentially deepening the bearish pressures.
Technical
The Nasdaq100 Futures faced a steep decline, breaching the 100-day moving average, signalling a significant downturn.
A resistance level emerged at 17165.25 amid overbought RSI conditions. The plunge pushed below a critical support at 16758.50, now serving as a potential resistance level. The index futures are currently inching towards a major support at 15792.50, marking a pivotal level formed from the massive rally in December 2023. The current position below the 50% Fibonacci Retracement level suggests sustained bearish pressures, potentially approaching the 61.80% Golden Ratio.
Given the oversold RSI conditions, the Golden Ratio might trigger a potential rebound, with the 16758.50 level likely eyed for possible upside movement. Conversely, a substantial breakdown below the Golden Ratio could reveal persistent selling pressure, potentially guiding the index futures towards the major swing low at 15792.50. Market sentiment teeters on this critical juncture as the index navigates between crucial support and resistance levels.
Summary
Navigating a whirlwind of volatility, Nasdaq100 Futures underwent a swift downturn after a rapid December surge. Declining 3.77% this week amid bearish pressures and global caution, the breach of key support levels near 16758.50 hints at intensified bearish momentum. Yet, the Golden Ratio might signal a potential rebound, teetering on pivotal support-resistance dynamics, reflecting the tug-of-war between market forces.
Sources: Automatic Data Processing Inc, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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