Nasdaq 100 outperforms post-Fed but fails to shift bearish technicals

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The US Federal Reserve (Fed) hiked rates by 0.75% and raised the median dot plot to 3.4% by the end of the year instead of 1.9% in its previous March plot. Given the current climate, inflation forecasts were raised, unemployment expectations were less rosy, and growth projections for this year and the next were lowered.

Markets pricing of future Fed rate hikes are majority pointing to a 75 basis point (bp) increase for July, and for a smaller 50bp (also by a majority) in their September meet. The strong hike this time around was the central bank’s largest since 1994 and might have been seen as hawkish, but expectations are it’ll be more controlled increases past the neutral rate and influenced the bond market accordingly.

Yields were in for a tumble (though have partially retraced as of writing), and meant real yields dropped significantly off recent highs though remain in positive territory when viewing the 5-year to 30-year range, all resulting in a risk-on move. A pullback in yields is always a plus for growth stocks, and in yesterday's session, it was consumer discretionary on top with communication and tech. Not that far off in terms of sector performance, the net result here was an outperforming finish for the Nasdaq 100 against the Dow 30 and S&P 500 by a decent margin.

While the Fed took the focus, US economic data largely disappointed with contraction for retail sales (-0.3%) and Empire (-1.2), and a drop in NAHB's housing index to 67. More housing data was on offer today and industrial production tomorrow, though that trading growth will be noting whether the latest moves in the bond market can stick, otherwise any further uptick in yields an ongoing fundamental strain re-affirming bearish technicals for the tech-heavy index.

Nasdaq Technical analysis, overview, strategies, and levels

Prices here finished above their previous 1st Resistance level in a session where conformist sell-on-reversals at the level failed while contrarian buy-breakouts won out.

Given where prices reside and concerning key technical indicators, more will be needed to shift its technical overview from what has been a bear trend, even if it has stalled plenty of times prior offering decent plays for contrarian strategies.

IG client* and CoT** sentiment for Nasdaq

Nasdaq chart with retail and institutional sentiment

Price increases usually result in a decrease in buy bias amongst retail traders, and since yesterday morning it has dropped a notch from 73% to 72%. It also signifies that given where the bulk of those long positions have been initiated at, more will be needed to push retail trader buy bias away from heavy long territory.

*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.