Was a bear market bounce just confirmed in the Nasdaq 100 futures?
If the short-term top is in, what could push around equities next and could the NAS100 be headed?
After a brief round of bullish vibes it looks like the bears may be back in control in the equity markets and ON risk sentiment.
Without any major news headlines to directly spark the turn, the Nasdaq 100 index seems to have made a short-term top as it swung lower in today’s trading session. It’s possible that today’s arguably weaker-than-expected economic updates from the U.S. had traders feeling that the likelihood of recession is growing, prompting traders to get back to selling risk assets after last week’s bounce.
Traders may also be making moves based on technicals as we can see in the 4-hour chart above, sellers took over at the 50% – 61% Fibonacci area, which also lines up with the 200 SMA, which tends to serve as dynamic resistance in downtrends.
This formation of another lower “high” may further draw in sellers this week into the longer-term downtrend, but before looking to play into the trend, we’ve got major catalysts ahead to take note of and factor into a trade plan.
On Wednesday, the European Central Bank is hosting a central bank forum where we’ll hear from major central bank players, including Federal Reserve Chair Powell, Bank of England Governor Bailey and ECB President Lagarde. It’s unlikely we’ll any change in rhetoric or stance on their current quantitative tightening plans, but we’ve definitely got to keep an ear out as any surprises would likely lead to market volatility.
And on Thursday, we’ve got the latest update from the Federal Reserve’s preferred inflation tool, the U.S. core PCE price index. Any signs of inflation slowdown from that data would likely spark an equity market bounce, while a stronger-than-expected number could prompt more weakness in the equity markets and strength in bond yields. In any case, make sure you keep your eyes and ears peeled for any headlines that impact risk sentiment!
Finally on Friday, we’ll get the latest look on U.S. business sentiment from the ISM Manufacturing PMI survey. This report will give traders a clearer view on the business cycle, including employment, prices, new orders, etc.
With all of these events, we should see a continued pick up in volatility for the Nasdaq 100. And if it all points to the current main driving theme of recession ahead and high prices staying put, the odds rise that there may be more pain ahead for equity bulls and a retest of the recent swing lows in Nasdaq 100 around 11,000.
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