Nasdaq Composite: A powerful engine, but without fuel

(News Bulletin 247) – The rate environment, “sporty” to say the least, continued to weigh on the Nasdaq Composite index, by the very nature of its composition, which is very sensitive to monetary issues. In the wake of the last FOMC, very restrictive in its tone and its dot plots, the American 10-year continued its rise. These 10-year Treasuries, which constitute an essential working barometer for those who want to work on Composites, were passing 4.50% at the time we wrote these lines. A psychological threshold, which had not been visited for 16 years…

“Markets are still digesting the message from central banks – higher rates for longer – and rising oil prices. US rates remain near the highest in more than 15 years, which they reached after the Fed meeting last week. (…) This weighs on stocks and supports the dollar (the Eurostoxx and the Euro-dollar are at their lowest since March), leading to a tightening of financial conditions”, deciphers Xavier Chapard of LBPAM.

As a reminder, the Fed made it clear to us last Wednesday that high rates would constitute a monetary matrix for a long time. And that the Fed Funds terminals, i.e. their high points, have probably not yet been reached.

The firmer than expected tone used by the Institution is justified by a stronger than expected resistance of the American economy after long months of restrictive monetary policy – the forecasts for growth rates and unemployment rates speak for themselves. Furthermore, the famous dot plots campaigned for slightly higher rates, for an even larger majority of members, before stabilization. As a reminder, dot plots are a dot graph showing the new key rate projections from Fed members. Compared to June, the camp hawkish has clearly gained thickness.

The Fed’s new economic projections reflect “a relatively optimistic picture of the economy that, if you [les] take […] literally, raises the question of why they did not raise rates again at this meeting…”, dares Christian Scherrmann, US Economist at DWS.

Furthermore, the downward revision of growth forecasts for the Chinese economy by S&P weighs heavily on risk appetite. From +5.2% for 2023, this forecast drops to +4.8%.

To be continued on the Apple side, once again the victim of disruptions in an Indian industrial site.

To follow this week in terms of statistics, the American consumer confidence index (Conference Board) tomorrow, orders for durable goods in the United States on Wednesday, the final data of the American quarterly GDP on Thursday (Q2), and PCE prices on Friday .

Index futures suggest an opening down 0.30%.

KEY GRAPHIC ELEMENTS

The underlying trend, powerfully upward, is naturally not called into question at this stage by the technical and graphic tools.

However, engaging in a broad consolidation phase, more engaging than a simple correction, is a scenario whose credibility rests on the formation of a characteristic double top in the month of July, and by the messages sent by the candles in the very construction of this double summit: marubozusencompassing, dojis. The candle in marubozu black school on Thursday 24/08, coupled with a bearish all-encompassing combination, broke the timid momentum of week 34.

If the 14,150 points were to constitute a monthly high point, the double peak mentioned above would then be flanked by two intermediate points. The graphic situation would be deteriorated.

The 13,240 points are identified as a weakened technical safeguard. The study of volumes will be essential to draw conclusions on rupture, if necessary. The index came to test, and further weaken this level on Thursday 21/09, on gap and closing at the low points of the session.

FORECAST

Based on the key chart factors we have mentioned, our view 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 resistance at 14150.00 points.

DAILY DATA CHART