Nasdaq 100: Another record close as participants brace for CPI

More testimony from Fed’s Powell, low-impacting data, and another record close

It was another day of processing testimony from Federal Reserve (Fed) Chairman Powell, where he felt the central bank’s balance sheet trimming has "quite a ways to go" and that rate cuts won’t be determined by political factors.

Key US equity large-cap indices were in for notable gains, and all sectors finished higher with tech on top. That helped propel the S&P 500 to cross 5,600, and the Nasdaq enjoyed another record close as well. Otherwise, there wasn’t much on offer in terms of US economic data, wholesale inventories for the month of May up 0.6% as expected and the weekly mortgage applications out of MBA (Mortgage Bankers Association) down a small 0.2%.

US Consumer Price Index (CPI) next

But that’ll change today with impacting data out of the Bureau of Labor Statistics, as market participants brace for CPI readings for the month of June, and where expectations are we’ll see year-on-year (y/y) headline drop from 3.3% to 3.1% but the stubborn core which excludes food and energy hold at 3.4%. Month-on-month (m/m) growth ought to remain relatively contained with 0.1-0.2% prints for headline and core.

There’s another auction with the 30-year for those noting the bond market after the decent results for the 10-year yesterday, and at least a couple other FOMC (Federal Open Market Committee) members speaking. Once that hurdle’s cleared it’ll be about more pricing data on Friday and earnings from financial heavyweights, likely to impact other equity indices that have significant exposure to the financial sector.

Nasdaq Technical analysis, overview, strategies, and levels

It’s a relatively clear ‘bull average’ technical overview when it comes to this tech-heavy index, with price remaining above all its main moving averages in both weekly and daily time frames, an RSI (Relative Strength Index) in overbought territory, and price at the upper end of the band.

That has left conformists with buy strategies but ideally initiating off the 1^st Support level only after a significant reversal (and more so on the daily time frame where the levels are narrower), and noting that buy-breakouts off the 1^st Resistance may not always offer much follow-through intraday if looking at recent moves (aside from yesterday) where it has required patience to achieve further upside gains.

Those expecting a pullback can rely on contrarian sell-strategies off the 1^st Resistance though ideally after a reversal, and sell-breakouts off the 1^st Support only if the reader isn’t expecting a hold here.

IG client* and CoT** sentiment for the Nasdaq

It’s been a consistent story of majority sell bias among IG clients generally shorting into price gains, though with the trend strong has enticed trend-traders and turned range-traders into cautious ones shorting into any price gains. Since yesterday, they’ve moved from 68% to 71%.

As for CoT speculators, they’ve mostly been close to the middle, but in the latest report moving out of slight buy territory to 55% on an increase in longs (2,241 lots) and a simultaneous drop in shorts (2,688).

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 the start of this week for the outer circle. Inner circle is from the start of last week.
**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.