Nasdaq 100: Eight-day winning streak comes to an end

Light losses ahead of more notable items

Light losses yesterday as the eight-day winning streak for the S&P 500 and Nasdaq 100 came to an end, though in the futures market undoing those losses as of this morning. There hasn’t been much to digest out of the US, but that should change from today. There’s the payrolls revision where expectations are we’ll see sizable downward revisions, and means an even weaker US labor market than originally thought. That should help some of the Federal Reserve (Fed) members who as of late have been citing the ‘balance of risks’, as focus tilts from their price stability mandate to their full employment one, even if hawks like Bowman who spoke yesterday remain "cautious in... considering adjustments to the current stance of policy". Minutes from the FOMC’s (Federal Open Market Committee) most recent meeting will release at 10pm Dubai time, but what seems to matter most is the next meeting in September where market pricing (CME’s FedWatch) expects at the very least a 25bp (basis point) rate cut, and that means this Friday’s (Fed) Chairman Powell speech at Jackson Hole is seen as the week’s main event, especially if he does pave the way in both size and scope.

Nasdaq 100 Technical analysis, overview, strategies, and levels

Key technical indicators on the daily time frame are a bit rosier thanks to the consecutive gains that preceded yesterday’s light losses, and that has shifted a couple of them to bullish with price above all its main short and long-term daily moving averages, not far off the upper end of the Bollinger Band, and a DMI (Directional Movement Index) that isn’t far off tilting to positive with the DI+ above the DI-. Looking at the rest though, and its ADX (Average Directional Movement Index) isn’t in trending territory just yet with its RSI (Relative Strength Index) yet to reach oversold territory.

Those technical indicators alone usually paint a cautious technical overview with the obvious short-term positive bias, but taking into account other factors and historic technical considerations has kept the overview ‘consolidation – volatile’ where it has been breakout vs. reversal on the strategic front, and where the former (which forms the conformist camp under the current overview) has net outperformed but usually needing additional sessions for follow-through past daily 1^st Resistance levels for buy-breakouts. Oscillatory sessions like yesterday lacked a play for both conformists and contrarians, the latter going opposite a move to the 1^st levels but only after a reversal.

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

CoT speculators have opted to remain close to the middle for months, and while it looked as though they might venture further into moderate majority buy territory, they pulled back last week to a net long 55% on a drop in longs (by 2,418 lots) and a simultaneous increase in shorts (by 1,336). Price gains usually tempt momentum traders back in, and that may help keep sentiment among them to the buy side.

IG clients shifted to majority short at the end of last week after roughly a month of majority buy sentiment, as traders who bought into the dip got enticed into closing out and fresh shorts initiate into price gains. They were slight sell yesterday at 53% and have since moved to 55% as of this morning, the exact opposite of CoT speculators.

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.