Nasdaq 100: Futures struggle after a session where tech was on top

Session of gains led by tech as oil prices dropped

Although geopolitical tensions have yet to subside, the fall in oil prices was seen as a boon for risk appetite and saw most sectors finish higher led by tech enjoying a healthy margin and followed by communication. In fact, only materials and energy finished lower and notably so for the latter after enjoying successive gains prior. That helped power the tech-heavy Nasdaq 100 to an outperforming finish against both Dow and S&P 500, though futures are showing partial retreat as of writing.

There wasn’t that much to digest in terms of economic data out of the US where NFIB’s small business optimism index improved slightly but was also a slight miss at 91.5 vs 91.7 expectations, RCM/TIPP’s survey showing results that are still in pessimistic territory even if improving from 46.1 to 46.9, and the trade deficit for August narrowing but still sizable at $70.4bn.

In terms of FOMC (Federal Open Market Committee) members speaking, there was the Fed’s Kugler in favor of further cuts if inflation eases. As for earnings among the tech-heavy index’s components, PepsiCo beat on earnings but suffered a miss on revenue and lowered its full-year revenue outlook.

Minutes from the latest FOMC meeting while noting geopolitical updates

Up next, we’ve got minutes from the latest FOMC meeting to digest, and that’s the one where they opted for a larger 50bp (basis point) cut to initiate the easing cycle, though markets aren’t optimistic they’ll see a repeat in their next meeting in November with market pricing (CME’s FedWatch) via heavy majority anticipating a smaller 25bp rate reduction instead. There are several FOMC members speaking as well, but at this stage traders are still noting geopolitical updates and its potential impact on the macro picture.

Nasdaq 100 Technical analysis, overview, strategies, and levels

Key technical indicators on the daily time frame are neutral to the positive side at this stage, with price still above all its main daily moving averages and not far off the upper end of what are narrow Bollinger Bands, on the DMI (Directional Movement Index) front a reasonable edge for the +DI over the -DI but where it won’t take much to upset and cause a negative DMI cross, an ADX (Average Directional Movement Index) not in trending territory and dropping, and the RSI (Relative Strength Index) far from overbought territory. That leaves the technical overview as ‘bull average’, though key technical indicators don’t require much to shift due to price-indicator proximity and means overviews will be on shaky ground at these levels, especially with the weekly time frame’s overview that’s ‘consolidation – volatile’ and not showing signs of settling.

IG client* and CoT** sentiment for the Nasdaq 100

CoT speculators are still net long with little change in percentage terms down only a notch from the week before to 57% on an increase in longs (by 4,324 lots) that was too far off the increase in shorts (4,458), and where they are now net long all four main indices (DJIA, S&P 500, Nasdaq 100, Russell 2000).

IG clients shifted from the middle yesterday to a majority short 58% with the price increase and relatively rangebound movement prior enticing more into range-trading and causing larger percentage changes in sentiment on relatively small changes in price. That means when the index rises in price, longs are enticed into closing out while shorts initiate.

Nasdaq 100 chart with retail and institutional sentiment

*The percentage of IG client accounts with positions in this market that are currently long or short. Calculated to the nearest 1%, as of today morning 8am for the outer circle. Inner circle is from the previous trading day.
**CoT sentiment taken from the CFTC’s Commitment of Traders report, outer circle is latest report released on Friday with the positions as of last Tuesday, inner circle from the report prior.