(News Bulletin 247) – Last weekend was tough for the index, which was particularly sensitive to the inflationary issue and its monetary response. The Nasdaq Composite will have lost 3.52% on Friday to 11,340 points (-5.60% over the week), with the resolutely offensive tone adopted by the ECB on Thursday and above all inflation figures (CPI) which are undermining the scenario of a “peak” rise in prices. 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.
To make matters worse, China where the vaccination rate remains low is still struggling with the Covid epidemic, with the threat of a new outbreak in Beijing, just days after a cautious reopening of public places.
But 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 the 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.
The Treasuries 10-year, 10-year government bond yield, now exceeds 3.27.
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 has been unappealing since May 25, was followed by a release of selling energy out of the bottom of a micro-diamond, followed by the formation of a large bearish gap.
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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