(News Bulletin 247) – A short technical reaction is possible on the Nasdaq Composite index, as the end of a meeting of the Fed’s Monetary Policy Committee approaches (tomorrow), and the day after a drop of more 2%, against a backdrop of fears of a decrease in activity of key suppliers in the context of an upsurge in Covid cases in China.
The Fed, which wraps up a key meeting of its Monetary Policy Committee (FOMC) tomorrow, is expected to begin a months-long campaign to beat inflation that could see Chairman Jerome Powell act even more aggressively after Russia’s war on Ukraine has pushed prices even higher’, for Eric Lafrenière, US Equities Manager at Richelieu Gestion. “Indeed, consumer price inflation accelerated in February to a new 40-year high on the back of rising gasoline, food and housing prices. even more so after Russia invaded Ukraine. The economic fallout from the war threatens to deliver a double blow: weaker growth and even higher inflation. This will further complicate the Fed’s job.”
If a 25 basis point hike is almost guaranteed – it is in any case priced in by the market – “The challenge of the meeting is above all to know how many rate hikes there will be this year. This will have an influence on the both on the economic evolution (via the credit relay, among others) and on the evolution of dollar pairs, such as the EUR/USD”, comments William Gerlach, Director France of iBanFirst.
On the statistical side, the producer price index relieved the markets somewhat, rising less sharply than expected, by 0.8% for the month of February, for the largest basket of products, in pace monthly.
KEY GRAPHIC ELEMENTS
As a reminder, here are a number of key elements presented in our previous technical and graphical analyzes on the index: “Congestion is expected between 13,330 points and 14,445 points, i.e. a wide band where the nervousness of operators. In the event of an exit from the bottom, especially in thick volumes, the technical situation becomes problematic. Week 07 was in this respect with very high technical stakes. The weekly closing level, of importance, is practically on lows of the week.”
In the light of the strength of the breach of this threshold, the 13,330 points are swung into major resistance, even if the index came to end Thursday’s session above it. The technical conditions of the breakout are indeed eloquent: bearish engulfing lined with a school black marubozu. The sales mobilization will have lasted the entire session.
The buying mobilization throughout the session on Thursday 02/24 is impressive and further validates the entry into a phase of high volatility. However, we remain negative below 13,330 points for the time being. After a short phase of rebalancing forces, where volumes will be put under close watch, the formation of a next bearish leg is envisaged. In the immediate future, after a short phase of perilous rebalancing, in divergent volumes, the scenario of a resumption of the decline below 13,330 takes place. Positive opinion, however, on the scale of the only session to come.
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 12640.00 points.
CHART IN DAILY DATA
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