Nasdaq Composite: From grist to hawks…

(News Bulletin 247) – The Nasdaq Composite (-2.10% to 14,185 points) will, unsurprisingly, have suffered even more than the other flagship indices of the American quotation, due to its composition rich in technological growth stocks, in the wake of a publication showing an acceleration in the rise in prices across the Atlantic.

The highly anticipated consumer price indices came out markedly higher, beyond expectations, raising fears of a faster and stronger tightening of the Fed. Excluding food and energy (elements considered volatile), prices rose monthly by 0.6% in December, against a consensus of +0.5%. Already in November, these prices rose by 0.6%. At an annualized rate, prices rose by 6%, unheard of since August 1982. Including energy and food, annual inflation is 7.5%.

What relaunch the scenario of a “double” increase in federal rates next month, namely a rise of 50 bps at once. At the risk of weighing heavily on growth records. This scenario, however, remains largely conditioned by the influence of the Fed’s most hawkish, Bullard in the lead. The latter notably declared that he had become “drastically” more restrictive in the light of the level of the published figures, and that he now wanted interest rates to be raised by 100 basis points by July, i.e. in only three central bank meetings. The likelihood of a 50 basis point rate hike in March has risen to nearly 89% from 24% two days ago, according to CME Group’s FedWatch Barometer, and government bond rates have risen. flown simultaneously. 10-year Treasuries rose rapidly above the symbolic 2% mark.

To be monitored in terms of statistics, the consumer confidence index (U-Mich) in preliminary data, expected to be stable at 67.2 this month. Verdict at 4:00 p.m. for this important barometer, as it has a strong potential impact. It should be remembered that across the Atlantic, the creation of national wealth depends very largely on domestic consumption.

KEY GRAPHIC ELEMENTS

Let’s stop for a moment on the combination of candles validated on Thursday 01/20, 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 underlying trend was broken, and after a pullback on January 12, the index started falling 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.

In the immediate future, the hanging candle drawn on Wednesday 02/02 on confirmation of the price/volume divergence, immediately followed by a bearish gap, calls for the greatest caution. Congestion is expected between 13,330 points and 14,445 points, ie a wide band where operators’ nervousness can be expressed. In the event of an exit from below, the technical situation becomes problematic.

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 14445.00 points.

CHART IN DAILY DATA

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