Nasdaq 100 hovering near record highs ahead of the Fed
Matt Weller, CFA, CMT June 16, 2021 7:58 PM
The Nasdaq 100 is testing its record high around 14,080, with a potential dovish Fed meeting looming as a possible bullish catalyst
As we noted last week, the Nasdaq 100 index has been lagging behind the other most-traded indices so far this year as traders rotate from fast-growing, technology-focused stocks to the more value-oriented “reopening” names that are more heavily-weighted in other indices.
That said, ongoing rotation between different sectors and indices is showing signs of shifting this week, with the Nasdaq 100 trading higher over the last two days while other US bourses like the Dow Jones Industrial Average (DJIA) and S&P 500 tick lower. More to the point, the Nasdaq 100 is testing its record high around 14,080 as we go to press, with a potential dovish Fed meeting looming as a possible catalyst to confirm the bullish technical setup (see our full FOMC meeting preview report for more on what to watch).
With another full month to go before we enter Q2 earnings season, the index is likely to take its near-term cues from the technical backdrop and macroeconomic developments; counterintuitively, weaker labor/consumer/inflation data could potentially boost prices for the index on the expectation of more stimulus from the Fed.
Looking at the chart, the Nasdaq 100 remains in a longer-term uptrend, with the 100-day EMA trending higher and providing support on dips for the past 14 months. Over the last month, the index has formed an accelerated bullish trend that is confirmed by a rising channel in the 14-day RSI indicator, signaling increasingly aggressive buying pressure of late:
Source: TradingView, StoneX
It’s notoriously difficult to project clear resistance levels when a market is in record high territory, but one tool that can traders set logical targets is the 127.2% and 161.8% Fibonacci extensions. Projecting these extensions off the two largest pullbacks we’ve seen year-to-date reveals two key areas of potential resistance: 14,400 and the 14,800-15,000 range. If we do see a bullish breakout in the coming days, Nasdaq 100 bulls may look to target these zones next.
On the other hand, a break below the near-term accelerated trend line would shift the near-term bias back to neutral for a possible retest of the 100-day EMA and longer-term bullish trend line. With a major fundamental event coinciding with a key technical “decision point” this week, Nasdaq 100 traders will have a lot riding on the developments over the next 48 hours!
How to trade with City Index
Follow these easy steps to start trading with City Index today:
- Open a City Index account, or log-in if you’re already a customer.
- Search for the market you want to trade in our award-winning platform.
- Choose your position and size, and your stop and limit levels.
- Place the trade.
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.