Nasdaq Composite: A very unsustainable rebound

(News Bulletin 247) – The rebound in the Nasdaq Composite (+3.13% on Friday) was fueled by legitimate temptations to buy on the cheap, at the end of a chaotic week. But with the backdrop remaining the same – namely the prospect of a sharp turn from the Fed this year – the rebound is unlikely to be long-lasting. The pre-opening data on Monday already suggests a start to the session in the red. It should be noted that the week will be particularly dense in important statistical benchmarks, and will end in a high point with the NFP report (Non Farm Payrolls), federal report on American employment, whose signals of tension will be scrutinized. Along with prices – the PCEs were published at the end of last week – the tensions on the labor market constitute an essential working basis for the Fed in the construction of monetary thinking.

The past week, at high risk, will have been marked by the FOMC of the Fed. If, as widely expected, no hike in federal rates was on the agenda – the tap will start to be tight in March -, Mr J. Powell remained evasive in distilling the calendar indices on the rate of rise of the Fed Funds in 2022. In the end, it was impossible for the operators to refine the number of increases (3? 4? 5?).

In the end, a scenario, which seemed “extreme” even a few weeks ago, of five Fed Funds hikes over the year, with a “double blow” why not as early as March, does not is not totally excluded from the universe of possibilities.

On the values ​​side, the very good quarterly publication of the emblematic Apple (+6.98% to $170.33) will have encouraged the rebound on the entire technological rating on Friday.

To be followed at 3:45 p.m. the Chicago PMI.

KEY GRAPHIC ELEMENTS

Let’s stop for a moment on the combination of candles validated on Thursday, firmly campaigning for a continuation of the ebb: a so-called three-cord black structure. The three black ravens are sometimes called “three-winged raven”, a term that comes from a Japanese expression saying that “bad news has wings”. This combination portends prices to fall if they appear at market highs or during an uptrend. Visually, the 3 crows are 3 black candlesticks, combining the following 2 characteristics:

1) All 3 candlesticks close at or near their lows.
2) Each open must be inside the body of the previous candle.

The structure is therefore fully validated and the thick and constant volumes on the three candles highlight its direction, in a market worried about the rise in long-term government bond yields.

In the end, over the whole of week 03, and on high cumulative volumes, the index will have closed on its session lows four times. In weekly data, this is the third time that it has closed on (or almost on) its weekly lows.

The oblique line symbolizing the trend The bottom line was broken, and after a pullback on January 12, the index fell again on January 13, with investors mobilizing throughout the session. Since then, the index has almost returned to levels where it had drawn a W on the slant last May. Breaking these levels would be problematic.

PREVISION

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 13950.00 points.

CHART IN DAILY DATA

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