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Yesterday,
the Nasdaq Composite finished the day positive as a big drop in the price index
in the ISM Services PMI turned the sentiment around and quelled some
inflation fears. In fact, the market stayed under pressure since the hot ISM Manufacturing PMI on Monday as the increase in the price index
renewed fears of a reacceleration in inflation. For now, the market might take
a sigh of relief, but all eyes then will turn on the US CPI report next
Wednesday.
Nasdaq Composite Technical
Analysis – Daily Timeframe
On the daily chart, we can see that the Nasdaq
Composite has
been diverging with
the MACD for a
long time. This is generally a sign of weakening momentum often followed by
pullbacks or reversals. The price recently broke out of the rising wedge and
bounced on the key 16206 level where we had also the red 21 moving average for confluence. This
is a critical support zone as a continuation to the downside should trigger a
major correction with the 14500 level as the ultimate target.
Nasdaq Composite Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the
price bounced on the 16206 level where we had also the 61.8% Fibonacci
retracement level for confluence. The buyers stepped
in with a defined risk below the Fibonacci level to position for a rally into a
new all-time high, but they will need the price to rise back above the trendline to
increase the momentum. The sellers, on the other hand, will want to see the
price reversing and breaking below the Fibonacci level to pile in more
aggressively into new lows.
Nasdaq Composite Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more
closely the recent price action with the strong bounce yesterday following the
ISM Services PMI release. We can see that we have a counter-trendline that
acted as resistance lately. If the price were to break above this
counter-trendline, we can expect the buyers to increase the bullish bets into a
new all-time high. The sellers, on the other hand, will likely lean on the
counter-trendline to position for a break below the Fibonacci level with a
better risk to reward setup.
Upcoming
Events
Today we will see the latest US Jobless Claims
figures, while tomorrow we conclude the week with the US NFP report.
This article was written by FL Contributors at www.forexlive.com.
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