This
first half of the week was highlighted by big misses in the US economic data
like Job Openings, Consumer Confidence and ADP. These
might be the first signs that a recession is indeed on the horizon as the
labour market is starting to show weakness. In fact, the market is no longer
seeing the Fed hiking interest rates as the September and November
probabilities dropped further and the rate cut expectations were brought
forward. Nonetheless, despite the worrying data, the Nasdaq Composite rallied
strongly as if nothing bad happened at all. There could be different reasons
that range from a relief rally due to dovish expectations and lower yields or
the market interpreting the softer labour market readings as good news for
inflation going forward. Until we see more data, the technicals will help in
managing the risk and in identifying the most probable market directions.
Nasdaq Composite Technical
Analysis – Daily Timeframe
Nasdaq Composite Daily
On the daily chart, we can see that the Nasdaq
Composite has bounced strongly from the key 13174 support and
rallied all the way back to test the broken trendline. Will
this be a classic “break and retest” move? There isn’t much to lean on for the
sellers except the trendline, and the moving averages are
crossing back to the upside which might be a bullish signal.
Nasdaq Composite Technical
Analysis – 4 hour Timeframe
Nasdaq Composite 4 hour
On the 4 hour chart, we can see that we have also
the 61.8% Fibonacci retracement level
around the trendline that can give the sellers some structure to position for a
move lower. In fact, if the price falls below the Fibonacci level, the sellers
are likely to pile in with a defined risk above the trendline and target a
break below the 13174 support.
Nasdaq Composite Technical
Analysis – 1 hour Timeframe
Nasdaq Composite 1 hour
On the 1 hour chart, we can see more
closely the resistance zone formed by the previous support now turned
resistance, the broken trendline and the 61.8%
Fibonacci retracement level. We can also see that we might be forming a bearish flag
pattern, but the price will need to break below the bottom trendline to confirm
it. In any case, a break below the steep trendline will give the sellers more
conviction for a downside move, while the buyers will want to see the price
breaking higher to keep targeting the highs.
Upcoming
Events
This week is all about the US labour market data and the
recent releases haven’t been encouraging on a forward-looking basis. Today, the
main event will be the US Jobless Claims report accompanied by the US PCE data.
Tomorrow, we conclude the week with the US NFP and ISM Manufacturing PMI
reports. It’s hard to see the Nasdaq Composite climbing even if the data misses
as the signals for a recession are accumulating, but the stock market always
finds ways to surprise even in the face of economic problems.