The Nasdaq staged an impressive bounce-back yesterday after initially coming under selling pressure on the market open, this could indicate that a bounce-back could be on the way for the leading USA tech index.
One notion I have why tech stocks recovered yesterday is that bonds have been falling over recent days, and the stock market could start to take that as bullish. The bond market is typically considered the “smart money”.
Lower yields are also good for stocks and tech in particular due to its perception as a long-duration asset. Additionally, the turnaround in oil prices today could lead to the FED hiking less aggressively.
A bullish wedge pattern is also in play on the price charts, providing that a powerful rebound could actually happen. Bulls now need some good news, such as a less hawkish FED.
Today’s FOMC meeting may not provide the clarity that the market needs in order for a big rebound to happen. Far more optimistic traders would become if the NFP jobs report came in under expectations. This could prompt the FED to speed down the pace of rate hikes.
The ActivTrader market sentiment tool is showing that some 82 percent of traders are bullish towards the US dollar index, which is an increase of around 7 percent since last week.
The fact that sentiment is still very bullish is worrying for more losses. Especially since the price collapse. I would prefer the herd to flip to negative before I think we see a meaningful price bottom forming for the Nasdaq.
US100 Short-term Technical Analysis
Looking at the four-hour time frame, the technicals show that the Nasdaq could be forming a base as sellers fail to crack support. Higher lows as traders know is very bullish technically.
It should also be noted that a triple-bottom price pattern is also in play across the lower time frames. A move the 11,850 level, or Ichimoku Cloud, could turbo charge the Nasdaq.
US100 Medium-term Technical Analysis
The medium-term picture for the Nasdaq looks quite bullish for me, due to the fact that a large falling wedge pattern is seen on the daily time frame.
Therefore, a move above the wedge, currently located around the 11,800 level could prompt with significant upside for the leading US tech index. Caution is warranted for bears if a wedge break happens.