(News Bulletin 247) – Faced with the chronic rise in bond yields, further catalyzed by the adoption of a resolutely firmer tone on the part of the Fed last week, the Nasdaq Composite index, very rich in growth records , is under great pressure. It has lost 3.86% throughout the past week and is about to open in red territory on Monday.
It is actually the whole question of the probability of a soft landing that is posed. “During his speech on price stability, Jerome Powell recognized that the current context did not make a “soft landing” of the economy obvious,” note the strategists of Lazard Frère Gestion in a note on the situation. “In other words, the Fed may need to implement a very sharp slowdown in growth to ease labor market tensions and stem inflationary pressures, which continue to build.”
Faced with the growing probability of seeing the Fed increase Fed Funds by 50 basis points as of the next Monetary Policy Committee, the Treasuries 10-year continued to firm up, now in close proximity to 2.75.
“If they want to fight against inflation, central banks will be forced to make their policy restrictive, but at the risk of causing a recession and/or a financial crisis”, summarizes Marie-Pierre RIPERT, Head of Economic Studies (SMA Gestion). “In practice, will they take this risk or will they accept higher inflation at the risk of losing their credibility? In the medium term, the change in the inflation regime that is looming means that central banks will no longer be able to excessively expansionary monetary policies in a sustainable way.”
In terms of statistics, only the inventories of American wholesalers were on the agenda on Friday, up 2.5% in February on a monthly basis, somewhat missing expectations. To follow in priority, on the agenda this Monday, the speech of Bowman (member of the Board of the Fed) at 3:30 p.m. (Paris time).
KEY GRAPHIC ELEMENTS
On the technical side, as long as the flagship index of technology stocks on the American side remains above 13,838 points, nothing is to be feared. This is a technical threshold easily regained, on a combination of candles in “three advancing soldiers”, from March 16 to 18. A move below 14,445 points was validated on Thursday signifying a reintegration of a trading range above 13,330 points. All against a background of divergence between prices and volumes. The first bearish CT objective at 13,840 is reached. The second (13,330) is in the viewfinder.
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 14660.00 points.
CHART IN DAILY DATA
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