Nasdaq 100 underperforms Dow Jones. ASX 200 at risk to hawkish RBA

Wednesday’s Wall Street trading session recap

Market sentiment soured on Wednesday during the Wall Street trading session. The Nasdaq 100, Dow Jones and S&P 500 futures weakened 2.18%, 0.05% and 0.04% respectively. In fact, it was the worst day for the Nasdaq relative to the Dow Jones in over three weeks. Capital fled growth stocks disproportionately relative to value ones. This continues to underscore the challenges investors face this year.

Looking at sectors within the S&P 500, consumer discretionary (-2.63%), information technology (-2.55%) and communication services (-2.11%) were the worst-performing segments. This did not mean that there were no losers on Wall Street. Utilities (+2.00%), real estate (+1.55%) and health care (+1.55%) outperformed.

Risk aversion plagued Wall Street as Treasury yields continued their ascent into new 2022 highs, driven by hawkish Federal Reserve policy expectations. The minutes of the March FOMC meeting revealed that policymakers are more than just open to 50-basis point hikes. This is as the central bank is expected to taper its balance sheet to the tune of USD 95 billion per month starting soon.

NASDAQ technical analysis

Nasdaq 100 futures may be vulnerable to near-term losses after the index appeared to confirm a breakout under a bearish Double Top chart formation on the four-hour chart. The neckline was taken out at 14725, exposing the 100-period Simple Moving Average (SMA). Immediate support appears to be the 38.2% Fibonacci retracement at 14380. Further losses may open the door to extending downward towards the March low.

Thursday’s Asia-Pacific trading session

Following the rather disappointing session on Wall Street, Asia-Pacific equities risk following the pessimistic tone that was set earlier. The economic docket is also light. Australia’s ASX 200 index will be an interesting one to watch following this week’s RBA rate decision which delivered a hawkish tilt. Russia’s attack on Ukraine is likely to boost European demand for Australian goods, perhaps boosting the latter’s economy.

However, China, which is Australia’s largest trading partner, has been enforcing draconian lockdown measures to contain an outbreak of the Omicron Covid-19 variant. Cases rose by almost 20k yesterday. This has been particularly impacting Shanghai, and economists have been downgrading 2022 growth expectations. This uncertainty may continue working against the ASX 200 in the near term.

ASX 200 technical analysis

Much like the Nasdaq 100, the ASX 200 may also be carving out a Double Top chart formation. The neckline appears to be around 7460. Clearing immediate support, which may be a combination of the 100-period SMA and the 23.6% Fibonacci retracement at 7415, may open the door to extending losses. This also follows negative RSI divergence, showing fading upside momentum.

ASX 200 4-hour chart

Follow Daniel Dubrovsky on Twitter @ddubrovskyFX

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