Nasdaq 100 Trade: Market participants brace for US CPI

Tech in slight retreat, lighter producer pricing data, and a cautious FOMC member

US equity index futures are little changed after a mixed session where there was lighter producer price growth for the month of December, the S&P 500 up 0.11% to 5,842 with the Dow enjoying healthier gains of 0.52% to 42,518, but where sector performance saw tech, communication and consumer discretionary finish lower and pushing the tech-heavy Nasdaq 100 to a slight red finish down 0.13% to 20,757.

Economic data out of the US showed producer prices for the month of December increase from a previous year-on-year (y/y) headline reading of 3% to 3.3% with its core (which excludes food and energy) also rising from a previous 3.4% to 3.5%, with month-on-month (m/m) prints at 0.2% and 0%, respectively. All four readings were lighter than anticipated and seen as a plus on the pricing front, with hopes building it’ll be a similar story of upcoming pricing data. Other items included NFIB’s small business optimism index jumping again and besting forecasts with a 105.1 reading at its highest since 2018 but RCM/TIPP’s economic optimism pulling back to 51.9 below the 55 estimate even if still in optimistic territory. The Treasury budget deficit at -$86.7bn was worse than anticipated, and a record -$711bn for first three months of fiscal 2025 nearly 40% higher than the same period last year no doubt a negative.

Treasury yields finished the session slightly higher on most of the curve with bond traders still nervous given where the highs they’ve been hovering at, and market pricing (CME’s FedWatch) still only sees one rate cut this year (that isn’t fully priced in) out of the US Federal Reserve (Fed), with the first chance of getting the 25bp (basis point) reduction in June.

There were a couple of FOMC (Federal Open Market Committee) members speaking, the Fed’s Schmid sticking to view of gradual policy rate changes that are only in response to a “sustained change in the tone of the data” and that it’s too early to tell how the incoming administration’s policies will impact the economy, and Williams focused on housing affordability in the district of the NY Fed.

CPI the real test, earnings from financial heavyweights, and plenty of FOMC members speaking

And there are plenty more FOMC members speaking later today in a session where we’ll get earnings from financial heavyweights including JPMorgan Chase and Citigroup, but given they aren’t components of the tech-heavy Nasdaq 100 means it’s impact is expected to be felt in other key indices like the S&P 500 and Dow 30. All of them however, are expected to experience volatility with US CPI (Consumer Price Index) figures releasing later today. Expectations are that the month of December saw an increase in the y/y headline from 2.7% to 2.9%, its core holding at 3.3%, and m/m growth of 0.3% and 0.2%, respectively. Figures that are higher than that would be a worry for both stock and bond markets after what have been stubborn 0.3% m/m prints when excluding food and energy. The weekly mortgage applications, Empire’s manufacturing, and business inventories will also be on offer though eclipsed by pricing data at a time when the readings are above the central bank’s target.

Nasdaq 100 Technical analysis, overview, strategies, and levels

Key technical indicators on the daily time frame continue to struggle with lower lows at times testing the lower end of the band, no longer above all its main daily long-term moving averages (MA) while beneath its main short-term ones, on the DMI (Directional Movement Index) front negative with a sizable margin for the -DI over the +DI, and its ADX (Average Directional Movement Index) in trending territory.

The weekly incorporates more bullish historic data where price is within its wide bull channel, the movement within it as always capable of shifting short-term technical indicators depending on where it resides. That’s helping keep the technical overview as ‘bull average’ on the weekly while ‘consolidation – volatile’ on the daily where breakouts off both daily 1^st Support and Resistance are in the latter’s conformist camp (and that’s without factoring today’s fundamental pricing data) while reversals are reserved for contrarians, even if yesterday saw little follow-through for daily conformist buy-breakouts off Tuesday’s 1^st Resistance level giving the edge to contrarian sell-after-reversals. For the weekly’s bullish overview, there’s added caution for conformists looking to buy off the weekly 1^st Support level (should it get there) noting the bull channel and ideally after a significant reversal by default and only via reversal or a fade for those that aren’t worried about getting stopped out on any initial move lower.

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

CoT speculators have opted to continue slowly trimming their net long positions in the tech-heavy index, dropping from 60% to 57% in the latest report on a drop in shorts (by 3,390 lots) and a simultaneous increase in longs (by 2,114). A slightly similar story played out of the Dow where net long bias has dropped to 55%, with the notable exception the S&P 500 where they were and still are net short at 55%.

IG clients shifted to majority buy a week ago on the consecutive pullbacks in price enticing shorts into closing out and longs into initiating, starting the week in heavy buy territory at 66% and as of today morning a notch higher at 67% just before the CPI event.

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.