KEY POINTS:
- Nasdaq price action remains rangebound but with a bullish bias
- Pullback in Fed support turned the focus heavily towards data
- Reaction to negative labour market data likely to reverse in 2026 as inflation remains a constraint for the Fed
FUNDAMENTAL
OVERVIEW
Since the peak in late October,
the Nasdaq has been bouncing around as the overstretched long positioning was
met with a less dovish Fed. The market maintains the bullish bias amid a strong
economy and the Fed’s dovish reaction function, but lacks the momentum seen in 2025
when Trump pulled back on aggressive tariffs and the Fed was in a clear easing
mode.
This year the main risk for
the bullish outlook is inflation. The “run it hot” narrative continues to
underpin stocks, and we’ve seen from the latest GDP report and the Atlanta Fed
GDPNow how the economy looks to be accelerating. That hasn’t translated into
persistent inflationary pressures besides the tariff driven spike in the
summer.
I have a feeling that US CPI
will be more important in the next months because inflation worry is what is
constraining the Fed from acting more quickly and with more conviction on rate
cuts. In fact, while weak labour market data was seen as positive for the stock
market on expectations of more Fed cuts, this year it might be seen as negative
if it comes with higher CPI data due to the above-mentioned constraint.
NASDAQ TECHNICAL
ANALYSIS – DAILY TIMEFRAME
Nasdaq – daily
On
the daily chart, we can see that
the Nasdaq has been compressing into a rising wedge. These types of patterns can resolve into a downside breakout taking the
price to the base of the wedge or an upside breakout leading to a strong rally
after the consolidation.
NASDAQ TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
Nasdaq – 4 hour
On
the 4 hour chart, we can see more
clearly the recent choppy price action that formed the rising wedge. From a
risk management perspective, the buyers will have a better risk to reward setup
around the bottom trendline to position for a rally into new all-time highs.
The sellers, on the other hand, will want to see the price breaking lower to
pile in for a drop into the base of the wedge around the 24900 level.
NASDAQ TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
Nasdaq – 1 hour
On the 1 hour chart, we can
see that we have a minor upward trendline defining the current bullish momentum
on this timeframe. The buyers will likely continue to lean on the trendline to
keep pushing into the top trendline of the wedge, while the sellers will look
for a break lower to extend the drop into the bottom trendline. The red lines
define the average daily range for today.
UPCOMING CATALYSTS
Today we conclude the week with the US NFP report and potential US Supreme
Court decision on Trump’s tariffs.
