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.