Nasdaq - Naughty or Nice?
It’s been a pivotal week for financial markets. For many, the last full week of trading before the Christmas break. The three headline central bank meetings on deck this week certainly delivered the goods, Christmas come early for some, for others, a chance to reflect on missed opportunities. Looking at the action we’ve seen this week and chatting with traders there’s certainly been plenty to focus on. However, the move seemingly catching the most attention ahead of the weekend is the reversal we’ve seen in risk sentiment. The Nasdaq in particular has shed more than 7% on the week, plunging from highs around 12229.22 to sub 11540.72 lows. So, let’s take a look at what caused the move and, as ever, if you caught it? Well done! If you missed it? There’s always next week.
What Caused the Move?
Fed - Higher for Longer
The first catalyst to look at is the Fed. The FOMC on Wednesday was an interesting event in that, while the Fed finally delivered a pivot on rates (hiking by a smaller .5%), the accompanying outlook was more hawkish. Citing the need to keep driving inflation lower, the Fed lifted its peak rate projection, forecasting that rates will stay at higher levels for longer with no rate cuts to be considered before 2024 at the earliest. This guidance saw risk assets tumbling with tech stocks bearing the brunt of the moves.
ECB Fireworks
Following the Fed we then saw the ECB lighting the markets up (in the wrong way) on Thursday. The bank struck a heavily cautious tone warning of the growing downside risks to the domestic and global economy next year. Additionally, a set of upwardly revised inflation forecasts means that traders are eyeing further hikes from the bank across next year, again weighing heavily on sentiment in tech stocks.
Recession Fears
Finally, recession fears swung back into sharp focus with November US retail sales falling unexpectedly into negative territory. Given that the pre-holiday season is typically a time of high demand, the data poses worrying questions for Q4 performance as a whole and added heavily to bearish sentiment in stocks, sending tech names plunging across the board, reflected in the Nasdaq breaking through support this week.
Technical Views
Nasdaq
The sell off in the Nasdaq this week saw the market reversing from the latest test of the resistance zone around 12220.22 with the bull channel top adding confluence. Price has since broken back below the 11540.72 level support and is now fast approaching a test of the 11034.18 level support and bull channel lows. Bulls need to defend this area to keep the broader bullish bias intact.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.