Nasdaq 100: Strong session as tech leads after fundamental updates
Market participants brace for more earnings from Big Tech with Apple and Amazon both expected to release their figures today.
FOMC dovish hold, weak labor data, and Meta’s earnings
The latest Federal Open Market Committee’s (FOMC) decision yesterday was a hold on rates, which as anticipated meant no surprises for market participants on that front. The statement had a few changes on the now “moderated” jobs market and “some” further progress on only “somewhat elevated” inflation from “modest” in its previous statement, and Federal Reserve (Fed) Chairman Powell thereafter spoke of “a reduction in our policy rate could be on the table as soon as the next meeting in September” should the data progress according to plan. The tone was generally interpreted as dovish, and market pricing (CME’s FedWatch) of future Fed rate cuts have improved. They were fully pricing in a rate cut for the September meeting prior to yesterday’s event, and majority pricing odds improved further on consecutive cuts for the final two meetings of this year. Yields were in for a drop and so too in real terms, with economic data out of the US showing a weaker labor market as ADP’s non-farm estimate for the month of July showed growth of 122K a miss, and the employment cost index for the second quarter of this year up only 0.9% vs. 1% expectations.
Earnings is still very much on the minds of market participants and more so when it comes to Big Tech attempting to justify its lofty valuations, with Meta yesterday managing to beat on both earnings and revenue, its share price surging as a result.
Earnings from Apple and Amazon before tomorrow’s NFP
And there’s more earnings on offer today from the heavyweights with Apple and Amazon both expected to release their figures. Those looking at US economic data have more labor releases with the weekly claims today and Challenger’s job cuts before the attention shifts to tomorrow’s market-moving Non-Farm Payrolls (NFP).
Nasdaq 100 Technical analysis, overview, strategies, and levels
The technical overview might still be bullish on the weekly time frame which incorporates more historic moves higher and kept plenty of technical indicators in that time frame green, but zooming into the daily time frame here and it’s been a story of mostly neutral key indicators, with the overview still ‘consolidation – volatile’ as market participants were busy digesting fundamental items including earnings and FOMC, not to mention keeping an eye on the rotation trade that at times seemed to take the wind out of tech stocks. Yesterday wasn’t one of them as the tech-heavy index outperformed and gave conformist buy-breakout strategies a clean and easy win. Overall, the latest moves have kept breakout strategies (whether it’s a buy-breakout action off the 1st Resistance or a sell-breakout strategy off the 1st Support) in the conformist camp while reversals are reserved for contrarians.
IG client* and CoT** sentiment for the Nasdaq 100
CoT speculators in the latest report have shifted from slight buy 52% to a slight sell 51% on a drop in long positions (by 12,533 lots) that were far greater than the reduction in shorts (by 4,901), though looking at the chart below and institutional sentiment (green-dotted line) has opted to remain close to the middle (50/50 red-dotted line) for months.
IG clients shifted to majority buy two weeks ago as those shorting into price gains were enticed into closing out while fresh buys initiated on the pullback. But they are no longer in heavy buy territory dropping from 67% yesterday to just 56% as of this morning thanks to yesterday’s gains enticing those same fresh longs into closing out and getting shorts to initiate.
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.
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