Nasdaq Technical Analysis – New all-time high as US CPI hedges get unwound

Fundamental
Overview

The US CPI report yesterday came in line with
expectations and sealed the 25 bps cut next week with the probabilities
standing around 97%. The Nasdaq rallied strongly as there were fears of
potentially higher than expected data and the hedges into the CPI release got
unwound.

Overall, the market’s
pricing remains largely unchanged around three rate cuts by the end of 2025. We
will likely need stronger evidence of inflation re-accelerating to price out
the remaining rate cuts. For now, the conditions for further upside remain in
place.

In fact, Trump’s policies should
be a positive driver for growth in 2025 and with the Fed remaining in an easing
cycle, growth should remain positive and might even accelerate as seen already recently
by the Atlanta Fed GDPNow indicator.

The risk in 2025 will be
inflation and the Fed’s reaction function. Right now, the Fed’s reaction
function is that a strong economy would warrant a slower pace in the easing
cycle and not a tightening. That should still be supportive for the stock
market.

If the Fed’s reaction
function were to change to a potential tightening, then that will likely
trigger a big correction in the stock market on expected economic slowdown. For
now, we remain in a “buy the dip” environment.

Nasdaq
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that the Nasdaq extended the rally into a new all-time high following the
US CPI release. From a risk management perspective, the buyers will have a much
better risk to reward setup around the major trendline. The sellers, on the other hand, will
want to see the price breaking lower to target a drop into the 20381 level.

Nasdaq Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have a minor trendline defining the current bullish momentum on
this timeframe. If we get a pullback into it, we can expect the buyers to lean
on the trendline to position for new highs, while the sellers will look for a break
lower to position for a break below the major trendline.

Nasdaq Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we have
the recent high that might act as support if the bullish momentum remains strong.
The buyers will likely step in around the support to target new highs, while
the sellers will look for a break lower to position for a drop into the trendline.
A hot US PPI today might provide a pullback, while soft figures should trigger
another rally. The red lines define the average daily range for today.

Upcoming Catalysts

Today we get the latest US jobless claims figures and the US PPI report.

This article was written by Giuseppe Dellamotta at www.forexlive.com.