Nasdaq Technical Analysis – Bad data spooks the market

Fundamental Overview

The Nasdaq sold off pretty aggressively on Friday following the weak US Flash Services PMI and later the Final UMich Consumer Sentiment survey where the long-term inflation expectations jumped to a new 30-year high.

The bulk of the selloff came after the jump in the long-term inflation expectations. The market might be fearing that in case we get a slowdown, the Fed might not be fast enough in cutting rates amid inflation remaining above target and uncomfortably high long-term inflation expectations.

Of course, one single data point might not be enough to get a bigger correction in the stock market, especially since it’s from the University of Michigan survey and since we are about to see a tick lower in the Core PCE Y/Y rate to 2.6% on Friday.

Nonetheless, this is something to keep in mind in light of the next NFP and CPI reports coming out before the March FOMC decision where we will also get the updated SEP and Dot Plot.

Nasdaq Technical Analysis – Daily Timeframe

On the daily chart, we can see that the Nasdaq couldn’t extend the rally above the key 22111 resistance and eventually sold off following the bad economic data. The sellers will likely continue to target the 20990 support, while the buyers will look for the price to rise back above the key resistance to increase the bullish bets into new highs.

Nasdaq Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the bearish momentum increased following the break of the upward trendline as the sellers piled in more aggressively. From a risk management perspective, the buyers will have a better risk to reward setup around the 21430 support to position for a rally into new highs, while the sellers will look for a break lower to increase the bearish bets into the 20990 level next.

Nasdaq Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that we have the most recent lower low around the 21955 level that could act as resistance. If the price pulls back into it, we can expect the sellers to step in with a defined risk above the level to position for a drop into the 21430 support. The buyers, on the other hand, will look for a break higher to increase the bullish bets into new highs. The red lines define the average daily range for today.

Upcoming Catalysts

Tomorrow we have the US Consumer Confidence report. On Thursday, we get the latest US Jobless Claims figures, while on Friday we conclude the week with the US PCE data.