NASDAQ 100 Rallies After Rate Cut, Eyes on US Core PCE

The Nasdaq 100 enjoys an uptrend as the Fed’s aggressive rate cut and dovish outlook trigger market risk appetite. However, the lingering risk of the US falling into recession may hamper the rally.

The index is looking to retest the July highs around 21,000. The technical patterns suggest a bullish continuation.

Chart Analysis

The daily chart of Nasdaq 100 shows a strong bullish trend. The 50-period and 100-period SMAs have formed a bullish crossover. The current price lies slightly above the key resistance level and psychological mark of 20,000. Friday’s high of 20,200 represents an immediate resistance level. However, it may not act as a tough nut for the bulls.

The daily chart also shows a minor unfilled gap near the 19,527 area, now a strong support zone for the index. The price may be tempted to pull back towards this area before continuing the upside.

Key Resistance Levels

Provided the retention of a bullish trend, the following key resistance levels may be tested by the markets:

Resistance 1: 20,026 is the immediate resistance that’s just broken. However, we still have to see whether the price would find acceptance above the level.

Resistance 2: 20,579 is the next resistance level around the order block zone. The buyers may find this area challenging.

Resistance 3: 20,983 is the ultimate level, July’s top, and buyers will push to retest it.

Key Support Levels

Support 1: 19,527 is a minor gap that could be tested if buyers exit amid profit-taking.

Support 2: 18,369 is the monthly low. If the first support is broken, the price may reach this level.

Support 3: 17,359 is the August low, which is solid support.

Fundamentals

After an outsized cut by the Fed, the odds of a 25-bps cut in the November meeting are at 67%. Stocks have cheered the lowering of borrowing costs. The Fed has shown concerns about a shrinking jobs market and a probable recession. Hence, the central bank may need to maintain its easing stance.

The four A’s of the Nasdaq 100 (Apple, Amazon, Alphabet, and Advanced Micro) have been trending higher with prospects of significant gains in the future. Therefore, the index may stay on the higher side.

This week’s major event is the US Core PCE Index, a preferred inflation gauge for the FOMC. Upbeat figures may trigger mild selling in the Nasdaq 100. Fed’s commentary is also essential to find clues about their monetary policy.

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Conclusion

The Nasdaq 100 looks poised to post further gains as risk sentiment remains favorable for stocks. However, a technical correction may occur amid profit-taking. The Fed’s dovishness and lowering inflation may keep the index supported.

This article was brought to you by FXGT.com team of Analysts.