Nasdaq 100: Gains as tech shines, participants brace for CPI

Lighter PPI data, yields drop, and a cautious FOMC member

It was about US pricing data yesterday with Producer Price Index (PPI) for the month of July posting readings that were lighter than anticipated, which in the current inflationary climate was a welcoming sight. PPI headline growth dropped to 2.2% year-on-year (y/y) from a previous 2.7%, its core (which excludes food and energy) falling from 3% to 2.4%, and month-on-month (m/m) readings for both contained at 0.1% and 0%, respectively. That helped risk appetite in the financial markets and saw key equity indices rise, with sector performance favoring tech, consumer discretionary, and communication, the exact trio needed to power the tech-heavy Nasdaq 100 to an outperforming finish against the S&P 500 and Dow 30.

Treasury yields finished the session lower and so too in real terms, with market pricing (CME’s FedWatch) getting even more generous on rate cuts out of the US Federal Reserve (Fed) via slight majority anticipating 50bp (basis points) in September, and targeting 4-4.25% by the end of this year.

Speaking of the Fed, there was an FOMC (Federal Open Market Committee) member speaking, Bostic "more confident" on inflation after recent data but needing "a little more".

US CPI next

And that “little more” could come today with the main event of the week: CPI (Consumer Price Index) for the month of July where expectations (and hopes) are that the m/m readings for both headline and core won’t breach 0.2% (after being rounded down), and where any drop in y/y figures will be seen as a positive.

Nasdaq 100 Technical analysis, overview, strategies, and levels

Key technical indicators on the daily time frame are still mostly neutral though price is now above all its main short-term daily moving averages and not too far off crossing the last of its main long-term ones, on the DMI (Directional Movement Index) front the advantage of the -DI over the +DI dropping, and an ADX (Average Directional Movement Index) still in trending territory. The technical overview remains ‘consolidation – volatile’ working within larger intraday ranges that has shown price unsettling at these levels, putting breakouts in the conformist camp and reversals reserved for contrarians, and that’s not factoring the fundamental event on offer today that depending on the results could take price well beyond shorter-term intraday levels.

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

CoT speculators have opted to remain close to the middle for months, but the latest report showing positioning among them moving from the middle to a majority buy 58% with little change in longs (up 854 lots) and a large reduction in shorts (by 11,477).

IG clients bought the dip and in turn saw sentiment among them reach heavy buy territory on the lows reached over a week ago, and since then have been enticed into closing out while shorts initiate, taking the bias from a majority buy 60% yesterday to a slight long 52% as of this morning.

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.