Nasdaq 100: Tech struggles force the tech-heavy index into retreat

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US market performance: Energy and industrials lead, tech underperforms

A slight majority of the eleven US sectors finished yesterday’s session in the green. These were led by energy and industrials with decent gains for real estate and utilities.

However, at the very bottom were communication, tech, and consumer discretionary. This was not the combination that the tech-heavy index needed, as it underperformed easily against the S&P 500 and especially the Dow 30. The latter managed to avoid a negative finish.

Central banks hike rates, Treasury yields increase

We had another central bank surprise after the Reserve Bank of Australia (RBA) raised rates on Tuesday. This time, for the US, the surprise was closer to home with the Bank of Canada (BoC) also hiking by 25 basis points. This took its key rate to 4.75%. That sent yields higher, and Treasury yields were no exception.

This also took them up in real terms when adjusting for inflation (breakeven inflation rates were little changed). While market pricing (Refinitiv) is still majority in favour of a holdout of the Federal Open Market Committee (FOMC) next week, they’re still pricing a rate increase in July via majority.

Influence of US economic data on markets

Regarding US economic data, there wasn't much on offer yesterday that could significantly impact the markets. First, the weekly MBA mortgage applications showed another negative print at 1.4%. However, this was not as sizable as last week's reading.

Second, the trade deficit for April widened to -$74.6bn. This was its largest reading since December, although not as bad as expected. Third, consumer credit for the same month rose by $23bn.

Upcoming data and events

For today, we have the weekly unemployment claims on offer. Otherwise, the situation is relatively quiet. However, traders and investors need to brace themselves for next week’s CPI (Consumer Price Index) and FOMC fundamental events.

Nasdaq technical analysis, overview, strategies, and levels

The pullback in price yesterday went beneath its previous 1st and 2nd Support levels. This favoured contrarian sell-breakout strategies. Conformist buy-after-reversals got stopped out despite the caution on avoiding fading strategies.

While it has tilted a couple of key technical indicators on the daily time frame, more will be required to undo its current bull trend technical overview, even if it is stalling more heavily in this time frame. From the weekly time frame’s standpoint, prices aren’t far off their 1st Support level.

The technical overview here is also a bull trend, thanks to successive weeks of price gains prior.

IG client* and CoT** sentiment for the Nasdaq

Given the heavy sell bias held by retail traders before yesterday’s moves and they've viewed the latest pullback as a boon, the short bias dropped amongst them to 60% as of this morning from yesterday’s heavy sell of 69%.

CoT speculators as per last Friday’s report (and last Tuesday’s positioning) are still in majority buy territory but not far off the middle, and are the exception when compared to sentiment in key US indices given they are majority sell the rest (S&P 500, Dow 30, and Russell 2000).

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.}