Nasdaq 100: Relative calm raises hopes that the worst is over

Light on data, a weak auction, and mixed earnings

There were a few items on offer in terms of US economic data including consumer credit change for the month of June suffering a miss with an $8.9bn print beneath $9.8bn forecasts. There was also the weekly mortgage applications out of MBA (Mortgage Bankers Association) enjoying growth of 6.9%, and with mortgage rates notably dropping may see further increases.

Key US equity indices finished the session a bit lower following a disappointing 10-year auction though given the rout earlier this month was seen as a relative positive, sector performance putting consumer discretionary session in the very bottom. Treasury yields finished the session higher (though have pulled back since), in real terms up as well, and market pricing (CME’s FedWatch) is still very optimistic on rate cuts out of the US Federal Reserve (Fed), for the remaining three meetings of the year via majority anticipating 50bp (basis points) in September, fully pricing in 25bp in November, and a coin toss on going for 50bp in December.

In earnings, Disney managed to best on both earnings and revenue but theme park worries sent its share price lower and failed to overcome positive news from the streaming side of the business, while (Nasdaq 100 component with an insignificant weighting) Warner Bros Discovery was in for a sizable pullback in after-hours trading due to the earnings and revenue miss that showed losses widen as well as writing down $9.1bn.

Weekly claims next

It usually isn’t a significant fundamental item, but in the current context with the focus on the labor market to see if there are any further signs of softening and today’s weekly claims out of the Department of Labor for the week ending August 2 will no doubt be noted.

Nasdaq 100 Technical analysis, overview, strategies, and levels

A couple key technical indicators on the daily time frame have turned red, with price beneath its main short-term daily moving averages (and just above the last of its main long-term ones), a negative DMI (Directional Movement Index), and an ADX (Average Directional Movement Index) in trending territory. It’ll take more to tilt the technical indicators red on the longer-term weekly time frame where it incorporates more historic bullish pricing data, but the uptick in intraday (and intraweek) volatility has kept the technical overview ‘consolidation – volatile’ where breakouts are in the conformist camp and reversals reserved for contrarians, even if the recent calm has helped aid sentiment in believing the worst might be over.

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

CoT speculators have opted to remain close to the middle for months, with the latest report showing positioning among them moving from a slight sell 51% to the middle on the reductions in shorts (by 6,019 lots) outdoing the drop in longs (by 3,594).

IG clients shifted to majority buy a few weeks back as fresh shorts that initiated into the moves that reached a record high back in July were enticed into closing out while longs initiated, with the latest reading showing the bias among them in heavy buy territory at 66% and only a notch higher compared to yesterday 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.