(News Bulletin 247) – The marked increase in Treasuries 10 years (3.574%) consecutive to the firm tone adopted by the Fed last week, will have catalysed the breaking of the lower limit of a consolidation flag (10,960 / 11,000 points), in thick volumes.
As a reminder on Wednesday, the firmness of the tone used by the Fed, at the close of the last FOMC of the year, will have surprised a large fringe of investors who were expecting more flexibility, in particular in reaction to the recent publication of a marked slowdown in inflation, as defined by November CPIs. J. Powell, who spoke at a press conference after the FOMC, brushed aside hopes of a pause in the rate hike process in early 2023, an option described as “premature”. No surprise, however, in terms of the extent of the rise in Fed Funds, inflated by 50 bps to reach 4.50%.
“Jerome Powell’s speech last week put investors in their place, who understood that a soft landing would probably not come hand in hand with a pivot from the American Federal Reserve,” coldly observes Vincent BOY (IG France). “Furthermore, the Fed Chairman’s comments showed that the institution would choose to force a recession, rather than seeing inflation persist over the long term.”
Fed members raised their rate projections to 5.1% for 2023 and 4.1% for 2024 from 4.6% and 3.9%, respectively, at their September meeting. They also anticipate higher inflation, at 3.1% for 2023, against 2.8% previously, and at 3.5% for “core” inflation, i.e. excluding the price of energy. energy and food, against 3.1% in September.
“Until now, any bad statistics were welcomed by investors and were positive for the financial markets, because they anticipated a more lenient Fed,” continued M Boy. “From now on, it is very likely that the bad economic data will be negative for the evolution of the global indices, due to fears of a recession in 2023.”
However, the activity barometer indices (PMI) in 1st estimates for December, published on Friday, were seriously disappointing. Missing the target, the US services PMI came out sharply down to 44.4 and the industrial component to 46.2. Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, shed the following light: “Survey data suggests Fed rate hikes are having the desired effect on inflation, but the economic cost is increasing and the risks of recession are increasing significantly”.
KEY GRAPHIC ELEMENTS
The flag (November 11 / December 14) is now broken, under volume conditions that make sense. Once the remainder of the November 10 gap, fully threatened, has been filled, the index has two short-term drop points (10,260, then the symbolic threshold of 10,000 points), before considering a technical protest reaction.
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 10960.00 points.
CHART IN DAILY DATA
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