Nasdaq Composite: Two successive large bearish gaps

(News Bulletin 247) – The combination of soaring prices, published on Friday, and a sharp drop in consumer morale will have caused a very large downward acceleration on the Nasdaq Composite index (-4.68% at 10 809 points), in substantial volumes.

Inflation figures (CPI) published on Friday undermine the scenario of a “peak” in price increases. Entering a high altitude plateau is rather the appropriate image. On the broadest product base (food and energy included), prices increased monthly by 1%, against 0.7% expected, and 0.3% in April… What further consolidate the he idea of ​​very firm monetary tightening, weighing on risky assets. At the end of May, inflation at an annualized rate (food and energy included) reached 8.6%. Excluding these volatile items from the base, the price increase reached 6%. The fear of the Fed – and of investors – namely entering into a price-wage spiral is not an option that has been definitively ruled out.

Friday – the figure has been somewhat forgotten – was also the day of the release of preliminary data from the Consumer Confidence Index (University of Michigan), which fell to an all-time low, completely missing expectations . Combined with the inversion of the 2- and 10-year bond yield curve, the indicator surreptitiously raises fears of an imminent entry into a contraction phase in GDP.

And this while the Fed ends tomorrow a new monetary policy meeting (FOMC). The Federal Reserve “is therefore not likely to change its discourse hawkish and the statements of the most “dovish” members, campaigning for a slowdown in the rate of tightening from September, risk falling by the wayside,” for Thomas Giudici, co-head of bond management at AURIS Gestion.

“The market is now anticipating a 75bp hike in key rates in September, compared to 25bp a week ago! little water in his wine to avoid too hard a landing still exists.”

Banks Goldman Sachs and JP Morgan are now also pricing in a 75bp hike in the cost of money. Verdict tomorrow at 8:00 p.m. (Paris time) for the monetary policy verdict itself and at 8:30 p.m. for a very high-stakes press conference.

To follow the producer price index at 2:30 p.m.

KEY GRAPHIC ELEMENTS

The narrow trading range that we identified between 13,330 and 13,838 points was broken under conditions of volumes, volatility, and very significant candles. The marubozu plotted on Thursday 04/21 shows in particular a mobilization of the selling side throughout the session, until a close almost exactly on the low points, opening the way to a bearish target CT at 12,640 points. The latter was broken, after a hesitantly nervous hesitation on the second part of week 17.

The warnings then came on and have not gone out permanently since. The harami envisaged on Monday has not been validated, and the relatively large candle, by its lower shadow, can serve as a framework for the start of a short-term bearish inflection. The reintegration of the lower part of the 20-day moving average (in dark blue), validated, brings a clear bearish message.

Friday’s closing level against the weekly lows, which we put on our watch, brings an additional bearish reading. The very clear price/volume divergence since May 25 was followed by a release of selling energy out of the bottom of a micro-diamond, followed by the formation of two large bearish gaps.

FORECAST

Considering the key chart factors we have mentioned, our opinion is negative on the Nasdaq Composite index in the short term.

This bearish scenario is valid as long as the Nasdaq Composite index is trading below the resistance at 12140.00 points.

CHART IN DAILY DATA

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