Nasdaq Composite: Towards a rebound in protest

(News Bulletin 247) – Despite maintaining Treasuries 10 years beyond the psychological threshold of 2%, the Nasdaq Composite (stable yesterday despite significant volatility in the session) should begin the debates on Tuesday on the rise, under the effect of cheap purchases. Remember that since the beginning of the year, the flagship index of technology stocks on the American side has fallen by nearly 12%, against the backdrop of the announced tightening of monetary policy.

The now chronic inflation, the increasingly harsh language elements among the most “hawkish” of the Fed, and the fear of an uncontrollable escalation on the Russian-Ukrainian geopolitical front weigh on the particularly sensitive Nasdaq Composite index. to LT government bond yields.

As a reminder on US inflation, the statistical high point on Thursday, the consumer price indices came out markedly higher, beyond expectations, and thus raising fears of a faster and stronger turn of the screw on the part 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 are heating up by 6%, unheard of since August 1982.

“This is a very broad-based price increase in the United States in January.” notes Bénédicte Kukla, Senior Investment Officer at Indosuez Wealth Management. “Temporary energy price hikes and supply chain impacts are taking longer than expected to fade. Looking ahead, labor market tightness in some sectors is putting pressure on average hourly wages (up 5.7% on an annual basis in January, the highest rate in 15 years) and increase the risk of long-lasting inflation.

“The risk factor remains an escalation of the Ukrainian conflict which would lead to very significant increases in energy prices” adds Ms. Kukla, who concludes that “in this context, the markets have now priced in six to seven interest rate hikes in 2022.”

To follow on the agenda this Tuesday, the producer price index and the manufacturing index of the NY Fed (Empire State index).

Note on the value side the continuation of the setbacks of Peloton, this designer and manufacturer of connected bicycles and innovative treadmills, which had reached stratospheric valuation levels at the height of the Covid crisis. Peloton has decided to remove its CEO, John Foley, and reach out to the former chief financial officer of Netflix and Spotify. In parallel with this change of management, 2,800 employees will lose their jobs.

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 case of exit from below, especially in thick volumes, the technical situation becomes problematic. As such, the week will be very technically challenging.

FORECAST

Considering the key chart factors we have mentioned, our opinion is positive on the Nasdaq Composite index in the short term.

This bullish scenario is valid as long as the Nasdaq Composite index quotes above the support at 13330.00 points.

CHART IN DAILY DATA

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