Nasdaq Composite: The 13,330 again in the role of safeguard

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(News Bulletin 247) – Technical rebound expected on the Nasdaq Composite today, after the 1.23% decline on Tuesday, the first session of a 4-day week across the Atlantic, due to a public holiday on Monday (President’s Day) . The market remains buffeted by the rise of a notch in geopolitical tensions between Washington and Moscow.

“It’s the start of a Russian invasion in Ukraine,” says Joe Biden now very clearly, who immediately announced a first wave of sanctions against Moscow. As a reminder, While the possibility of a summit between Biden and Putin would have been quickly showered by the latter, who considered the option “premature”, the Kremlin is now close to the Rubicon: it recognizes, by openly supporting the separatists in the Dombass, the independence of two regions of this eastern part of Ukraine, which constitutes an additional step in the escalation, and further materializes the entry into a new Cold War with the West. “Markets breathed a sigh of relief that the sanctions weren’t that drastic,” said Jeffrey Halley, an analyst at Oanda, who said “the United States, Europe and other countries are adopting a sanctions strategy progressive steps aimed at giving President Putin a diplomatic way out along the way”.

In terms of statistics yesterday, flash PMI (IHS Markit) significantly above expectations in the United States with regard to the very first estimates for the current month. A reassuring indicator, the consumer confidence index (Conference Board) emerged at a firm level, boding well after worrying measures of consumer morale according to the work of the University of Michigan (U-Mich). No major benchmark is on the agenda this Thursday across the Atlantic, and eyes are already on GDP tomorrow and PCE prices on Friday. Something to bring food for thought to the Fed, whose intentions for the March FOMC are ultimately still unclear.

“We are monitoring the risk of overly aggressive tightening by the Fed, which could lead to a marked economic slowdown and a widening of credit spreads”, warns César Perez Ruiz, Head of Investments and CIO at Pictet Wealth Management.

“Markets still don’t know what the Fed’s scheduled March meeting has in store. Few central bank officials have spoken in the past week, making expectations difficult. Governors appear to be evenly split between ‘hawks’ and “doves,” the minutes from their last monetary policy meeting showing that voting members remained sharply divided, both on the pace of interest rate hikes and on shrinking the Fed’s balance sheet.”

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 trends background has been broken, and after pullback on January 12, the index fell again on the 13th, 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. Week 07 was therefore very technically challenging. The important weekly closing level is practically at the lows of the week.

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

Nasdaq Composite: The 13,330 again in the role of safeguard (©ProRealTime.com)

©2022 News Bulletin 247

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