The Nasdaq remains stuck in a range as traders await the US CPI and US-Iran risk premium increases
FUNDAMENTAL OVERVIEW
The Nasdaq has been mostly rangebound since the last FOMC decision due to the Fed tightening risk and overstretched positioning. We saw with the South Korean stock market (KOSPI) how overstretched positioning and a hawkish central bank are not a good mix for the market. The KOSPI officially went into bear market yesterday after falling more than 22% from the record high.
This week, the market has been under pressure also because of heightened tensions in the Middle East. Yesterday, it looked like we were going back to pre-MoU situation as the US launched a series of strikes on Iran in response to Iranian attacks on three vessels in the Strait of Hormuz. Iran retaliated by bombing US bases in Bahrain and Kuwait, warning of further strikes if the US continued.
Moreover, Trump said to reporters at the NATO summit in Turkey that the Memorandum of Understanding was over for him and he didn’t want to engage with Iran anymore. Oil prices extended the gains and inflation worries returned. We got a hawkish repricing in interest rate expectations across the board. The chances for a July hike jumped to 34% and the total tightening by year-end increased to 38 bps.
Luckily, Trump delivered quickly the usual “TACO” moment when he said that he doesn’t think the war is going to restart. Later, he also claimed that the Iranians called him because they want to make a deal. The de-escalation led to some minor dovish repricing and triggered pullbacks across the board. If this was just a limited escalation, the focus should go back to the US CPI which is likely to be the main event of the month (barring US-Iran drama).
In case the data surprises to the upside, we will likely see a selloff in the Nasdaq on a hawkish repricing and increase Fed tightening risk. On the other hand, lower than expected figures should trigger another dovish repricing and support the stock market.
NASDAQ TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see the Nasdaq got stuck in a wide range between the 28,800 support and the 30,900 resistance. From a risk management perspective, the buyers will have a better risk to reward setup around the support to position for a rally into new record highs. The sellers, on the other hand, will want to see the price breaking lower to start targeting the next support around the 26,300 level.
NASDAQ TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we have a downward trendline defining the bearish structure. The sellers will likely continue to lean on the trendline with a defined risk above it to keep pushing into new lows. The buyers, on the other hand, will want to see the price breaking higher to pile in for a rally into the resistance.
NASDAQ TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we have a minor upward trendline defining the pullback into the major downward trendline. We can expect the buyers to lean on the trendline with a defined risk below it to keep pushing into new highs, while the sellers will look for a break to increase the bearish bets into the support. The red lines define average daily range for today.
UPCOMING CATALYSTS
Today, we get the latest US Jobless Claims figures.
This article was written by flfeaa2662d774455a8d50fa77b791ed5f at investinglive.com.
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