Nasdaq 100: Overview still cautious ahead of more economic data

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Hotter CPI data

We got the US Consumer Price Index (CPI) readings for the month of August, and it showed a reading for the headline year-on-year (y/y) that was hotter than anticipated at 3.7% vs 3.6% expectations. Also above forecast was its core month-on-month (m/m) reading at 0.3% which excludes food and energy, with m/m headline rising from 0.2% to 0.6%. The exception was the drop in core y/y from 4.7% to 4.3%."

Market reaction and implications

Market reaction showed little change by the close for key indices, with a red finish for the Dow 30, but both the S&P 500 and Nasdaq 100 in the green. The latter was aided by sector performance that showed consumer discretionary, communication, and tech sectors avoiding losses.

As for Treasury yields, they finished the session lower, and so did real terms, which is a plus for growth stocks. However, breakeven inflation rates edged slightly higher again. Market pricing (Refinitiv) following the readings shows that a pause is nearly fully priced in for the FOMC (Federal Open Market Committee) meeting next week.

This backs off from what was nearly a coin toss on another 25bp (basis point) hike for their final two meetings of this year. The first rate cut from current levels is mostly priced in for June of next year.

Remaining data

We’ve got more pricing data to digest today with producer prices, otherwise focus on retail sales and the weekly claims. Manufacturing and production data, trade pricing, and the preliminary consumer sentiment and inflation expectation readings out of the University of Michigan (UoM) will be released tomorrow.

Nasdaq technical analysis, overview, strategies, and levels

Both intraday highs and lows remained within the previous 1st levels, despite the fundamental data released from the US. This resulted in a lack of opportunities for both conformist and contrarian strategies in the daily time frame. Price has successfully closed above its main long-term daily moving averages, which is viewed positively from a technical standpoint. However, most technical indicators remain neutral, and the overall overview in this time frame is still 'cautious consolidation.' In contrast, the weekly overview presents a 'bull average' perspective, indicating a more favorable technical picture.

IG client* and CoT** sentiment for the Nasdaq

As for sentiment, a rise in price usually translates into an increase in retail trader sell bias, and that was the case as yesterday it was 58% and since then taking it further into short territory at 62% as of this morning. Institutional sentiment is from last Fridays CoT report, where they hold an opposite majority long bias that fell a notch to slight buy 54%.

Nasdaq 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.}