Nasdaq rallies into trendline as market reprice Fed outlook
Last week saw the NASDAQ outperform many of its peers, with market sentiment taking a significant turn with regards to future interest rate movements. Not only did last week's FOMC meeting and US jobs report help lower the chances of a December rate hike (down to 10%), but markets are also growing increasingly confident that we will see central banks cut rates next year. From a wider macro perspective, soaring debt level on both the government and household level raise concerns over the implications for a prolonged period of elevated borrowing costs. With the economic outlook starting to weaken, we are also seeing markets react to the growing prospect of quicker disinflation. From a historical perspective, the Nasdaq fares particularly well in times of accommodative monetary policy. The AI boom has helped alleviate much of the downside that might have been evident otherwise. However, the third quarter earnings season has been somewhat unforgiving for big tech, even when beating estimates on both the top and bottom line.
Last week's risk-on play particularly helped this index with price regaining the losses seen over the prior fortnight. That rally has taken us back into trendline resistance which has been respected on a number of occasions over recent months. From a wider perspective the descending channel that we have been seeing since the July peak will likely ultimately provide the basis for another leg higher in this index. However, the question mark over whether that recovery phase occurs from here remains to be seen. A break up through the 15318 swing high established back in early October would provide the basis for a bullish continuation move. However, with price back at trendline resistance, traders should keep a close eye out on intraday charts for a topping pattern that might signal the potential for a fresh bearish turn here.
Last week's risk-on play particularly helped this index with price regaining the losses seen over the prior fortnight. That rally has taken us back into trendline resistance which has been respected on a number of occasions over recent months. From a wider perspective the descending channel that we have been seeing since the July peak will likely ultimately provide the basis for another leg higher in this index. However, the question mark over whether that recovery phase occurs from here remains to be seen. A break up through the 15318 swing high established back in early October would provide the basis for a bullish continuation move. However, with price back at trendline resistance, traders should keep a close eye out on intraday charts for a topping pattern that might signal the potential for a fresh bearish turn here.