(News Bulletin 247) – The Nasdaq Composite (-0.18% to 11,461 points) should open in negative territory on Monday, in the wake of a federal employment report (NFP for Non Farm Payrolls), which played killjoys the day after the publication of rather lenient inflation figures (PCE), more than expected in any case. In detail, while the unemployment rate stood at a stable level, at 3.7% of the active population, the number of job creations in the private sector (excluding agriculture) remained high, at 263,000 new units, well above target; and above all, the dynamics of wages (+0.6% on a monthly basis) shows no signs of easing. Not enough to deflect the overwhelming odds of a 50 basis point increase in Fed Funds for the next FOMC, but enough to send a message of caution.
It is the whole question of the shape of the Fed Funds curve which obsesses the trading rooms, and which has a direct impact on the yields of sovereign bonds, with a Beta effect on the index which interests us here, which full of growth stocks.
Thomas Costerg, Senior US Economist at Pictet Wealth Management, expects “the Fed to raise the fed funds rate within a range of 5.0-5.25% (from 3.75-4.0% currently) by March 2023 and then maintain it at that level for the rest of the year. Fed messages could remain strong due to the rigidity of inflation expectations, the still high inflation in the services sector and the resilience of wage growth. At the same time, the central bank’s balance sheet is likely to continue to shrink in line with pre-planned plans, barring excessive deterioration in liquidity conditions.”
KEY GRAPHIC ELEMENTS
On Thursday the Nasdaq Composite retraced higher the full extent of a consolidation flag between roughly 11,000 and 11,500 points, in strong volumes, with an open on session lows, and a close exactly on the high points. If this does not bode well for a final exit from the top, a little air has certainly been found. But the amplitude of a bypass flag has been clearly defined. It is within this flag that the oscillations will continue.
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 11460.00 points.
CHART IN DAILY DATA
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