The Nasdaq100 Futures (CME: NQ) have recently faced a shifting landscape, marked by a downturn following the establishment of a new peak earlier this year. Last week, the index futures experienced their first weekly loss after a remarkable five-week streak of gains. This decline can be attributed to the resilience of the Greenback, buoyed by robust economic data.
Of particular significance is the U.S. inflation rate for January, which surpassed expectations by reaching 3.1%. While slightly lower than the previous month, its elevation above the anticipated 2.9% sparked notable market reactions, evident in the decline of the Nasdaq100 Futures. Moreover, January’s month-on-month Producer Price Index (PPI) displayed strong growth, exceeding both December’s figures and market expectations.
As market sentiment shifts, the probability of a rate cut has diminished, with expectations of a cut in May dropping to 34% from as much as 52% prior to the inflation report. As the market eagerly awaits the upcoming release of the FOMC minutes, close attention is being paid to how the Nasdaq100 Futures will be influenced by the nuanced aspects of the Federal Reserve’s monetary policy stance. Furthermore, the release of Nvidia Corporation’s results on Wednesday could have an impact on market sentiment over tech stocks.
Technical
The Nasdaq100 Futures market demonstrated a bullish trajectory, supported by robust technical indicators. The futures have followed an uptrend characterized by an ascending channel pattern.
A significant support level was established at 17221.50, coinciding with oversold RSI conditions and the moving average, sparking a rally that propelled the index futures to establish new highs at 18121.50. However, the rally faced selling pressures as overbought RSI conditions emerged alongside higher-than-expected inflation data at this peak.
This led to a retracement towards the 61.80% Fibonacci Retracement Golden Ratio. Subsequently, oversold RSI conditions at this level prompted a temporary bullish reversal. Nevertheless, the upside momentum fell short of the resistance level, resulting in another reversal. Currently, with the index futures trading at the 50% Fibonacci Retracement level, market participants will likely closely observe the reaction at this level. If respected as an intermediate support level, the 18121.50 level could regain prominence as an upside point of interest. Conversely, a breakdown below the 50% level on high volume could indicate intensified selling pressure, potentially leading to further downside towards the 61.80% Golden Ratio.
Summary
The Nasdaq100 Futures face a nuanced landscape, influenced by economic data and market sentiment. Despite recent declines, technical indicators suggest a potential for bullish momentum, with key levels at 17221.50 and 18121.50. The 50% level stands as a pivotal point, potentially influencing the direction of the index futures depending on the market’s reaction to the level.
Sources: CME, U.S. Bureau of Labor Statistics, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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