FOMC hawkish hold sends risk appetite into retreat on Nasdaq 100

Chairman Powell's stance on interest rates

That stressed the 'higher for longer' narrative, and rate hike likelihoods (CME's FedWatch) are now near a coin toss on a final 25bp (basis point) hike in December/January, and crucially, pushing out the first rate cut from current levels to September of next year.

As for Chairman Powell, he said that they'll "proceed carefully," but that "stronger activity means we have to do more with rates," and on inflation, he wants "to see convincing evidence," with "more progress before" reaching that conclusion.

Yields climb, tech in retreat

A hawkish FOMC hold sent yields higher, and for the further end, carrying into this morning as of writing, denting growth valuations.

That put communication, tech, and consumer discretionary in the very bottom in terms of sector performance where most were in the red, and only defensives finished in the green with very small gains. This meant a hit for the tech-heavy Nasdaq 100 index, which underperformed against the S&P 500 and, more so, against the Dow 30.

There was little to process in terms of US economic data; the weekly mortgage applications showed a 5.4% increase. There's existing home sales, the weekly claims, and Philly Fed's manufacturing today before preliminary PMIs (Purchasing Managers’ Index) tomorrow.

Nasdaq technical analysis

We got a move here yesterday that went past its previous first support and reached its second support, giving contrarian sell-breakouts plenty of opportunities while lacking a trigger for cautious conformist buy-after-significant reversals. This strategy will likely remain cautious as the fundamental event gets processed over the next two trading sessions.

Given the price-indicator proximity and further declines past key levels that stick will be needed to shift the overview to something bearish on the daily time frame. Those anticipating it prior were entertaining contrarian breakout strategies.

As for sentiment, we saw a drop in retail trader majority short bias from 58% to a slight sell 52% as of this morning as shorts were enticed into closing out and longs initiated. That’s exact opposite CoT speculators who as of Tuesday last week were a slight buy 52%. The latest figures for this week will be released tomorrow night out of the CFTC.

IG client* and CoT** sentiment for the Nasdaq

IG Client Sentiment chart

_{* 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.}