Nasdaq outperforms but fails to shift its technical overview

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Minutes from the FOMC's (Federal Open Market Committee) latest meeting showed most policymakers are in favour of a 50 basis point increase which would 'likely be appropriate' for the next couple of meetings, and generally avoid any further hawkish surprises to financial market participants.

In central bank speak, the Federal Reserve’s Brainard said that inflation is the central bank's 'most pressing challenge' and will take 'strong actions that will bring inflation back down'.

US economic data showed durables growth slow month-on-month to 0.4% overall with its core 0.3%. Over in the housing sector, according to MBA (Mortgage Bankers Association), mortgage applications contracted again, this time by a smaller -1.2%. We've got more items with pending home sales and preliminary GDP (Gross Domestic Product) on offer tonight, and where tomorrow's pricing data can't be ignored.

Over in the bond market, yields changed little in yesterday's session, and in turn caused real yields to end about the same on the further end of the curve with the seven-year on the verge of crossing back into negative territory. As for the stock market, most US sectors finished in the green with a few defensives like utilities, consumer staples and health care little changed, with big gains for consumer discretionary. Both tech and communication clocked in decent increases.

The net result for this tech-heavy index was an outperforming finish that bested both the Dow 30 and S&P 500 in percentage terms. Far more will be needed to undo its bear trend technical overview in both daily and weekly time frames, with futures pointing lower, undoing some of yesterday’s gains.

Component performance showed Zoom well on top, followed by DocuSign and Intuit with gains by heavyweights like Apple and Tesla a plus. Losses were relatively limited on the other end save for DexCom. In after-hours, component Nvidia's share price was in for retreat off its recent highs even after it bested on earnings and revenue. It cited a 'challenging macro environment' and predicted revenue for this quarter to be below analyst expectations. Autodesk, Baidu, Costco, Dollar Tree, Marvell Technology, Workday, and Zscaler are the components expected to release their figures today with Pinduoduo tomorrow.

Nasdaq technical overview, strategies, and levels

IG client* and CoT** sentiment for Nasdaq

Retail trader bias remains in heavy buy territory though following yesterday’s price gains has dropped from 77% to 74%. It’s usually 78% and above that signifies sentiment is at the extremes. A drop to 74% on yesterday’s price gains means far more upside follow-through will be needed to unwind plenty of those longs in profit and incentivize them to close out.

Nasdaq 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.