Nasdaq 100 forecast: Will AI optimism fuel breakout in Apple?

US technology stocks extended their gains shortly after the open on Wall Street, helping the Nasdaq 100 to add to Wednesday's surge to new record highs, before pulling back slightly on profit-taking ahead of Friday’s key US jobs report. Today, investors will be keen to see how much further Nvidia might rise after becoming the first computer chip company to reach the $3 trillion milestone, or whether it will be hit by further profit-taking, after the earlier advance to a new high was met with stronger supply. Besides Nvidia and general tech optimism, attention is on the European markets after the European Central Bank has just delivered its first rate cut of the year, although 25-basis-point cut was already anticipated. Still, it is worth watch the DAX and other European indices to gauge investors’ risk appetite heading into the European close. In the US, thanks to the Nvidia rally, other stocks in the sector such as Amazon, AMD, and Apple have shown bullish price action, indicating potential further gains, especially for the iPhone maker. The Nasdaq 100 forecast remains bullish until the charts tell us otherwise.

Bulls overwhelm bears yet again

Today’s earlier modest gains came after the S&P 500 and Nasdaq 100 both closed at record highs after another surge in Nvidia shares to uncharted territories on Wednesday. The latter was up another 2.3% at one point shortly after the open, before turning lower amid profit-taking, keeping the Nasdaq little-changed. This week’s sharp rally has more than erased the previous week's decline, which had suggested a temporary market top as yields rose amid concerns about prolonged high interest rates. However, the bulls overpowered the bears once again as bond yields fell following disappointing US macro data earlier in the week, reducing expectations of sustained high interest rates. On Thursday, positive news was received positively, as traders took the ISM Services PMI beat in stride, focusing instead on another bullish breakout in Nvidia stock, which reached a staggering $3 trillion market capitalisation.

What will traders be focusing on today?

The renewed optimism in the tech sector aligns with increasing investor confidence that central banks across the developed world will be able to ease monetary policy this year. The Bank of Canada initiated its rate-cutting cycle and signalled more easing to come. Today, the European Central Bank followed suit with its own 25 basis point rate cut. However, the ECB, being a more influential player, was a bit more cautious about future tightening, which has the potential to disrupt the bond market rally observed over the past several days—the longest streak since December.

Traders are also starting to price in more Federal Reserve easing this year following Monday's weak ISM manufacturing PMI and signs of a softening labour market as indicated by the JOLTS Jobs Opening, ADP Non-Farm Employment Change and Jobless Claims data all disappointing expectations this week.

Due to the softening of US data (Wednesday’s release of the ISM services PMI bucking the trend), market consensus has shifted towards anticipating more interest-rate cuts this year, though this could change again. In Europe, higher-than-expected wages may prevent the ECB from further rate cuts in September. If today’s decision turns out to be the only ECB rate cut for a good next few months, then it could trigger a fresh rise in bond yields, potentially putting pressure on the tech sector rally.

Nasdaq forecast: Nvidia and Apple among tech stocks to watch

Nvidia shares have surged nearly 150% this year, driven by skyrocketing demand for its chips used in artificial intelligence tasks. On Wednesday, its market value exceeded $3 trillion after a 5% jump in shares, surpassing Apple to become the second most valuable company in the world, behind Microsoft. The question now is whether Nvidia can claim the top spot. Well, today’s early price action pointed to profit-taking and consolidation.

In addition to Nvidia, Apple stock is also worth monitoring. Until recently, Apple had been in negative territory for the year due to concerns over cooling iPhone demand in China and a fine from the European Union. However, the stock has gained momentum in recent weeks and could be approaching a new all-time high. If it does, the next question is whether it can sustain this potential breakout. Since July last year, Apple has repeatedly failed to break through the $195-$200 resistance range, peaking at an all-time high of $199.62 in December before entering a multi-month slump. Now, with renewed tech optimism, Apple is once again at this key resistance zone. Will it finally break through the $195-$200 range, or will there be another bearish reversal?

Source: TradingView.com

Given the size of these stocks, any reversal for Nvidia and/or Apple should not be taken lightly when trading index futures or index ETFs such as QQQ or SPY.

Nasdaq 100 forecast: technical analysis and trade ideas

Given Wednesday’s clean break out, the Nasdaq 100 forecast remains bullish from a technical point of view. The broken old record made in May at 18947 is now going to be the first short term support zone to watch on any dips, which could get defended. Below this area, the base of this week's breakout at around 18700 is the next key level of support.

Any potential move below that 18700 level would put the bulls in a spot of bother, and more so if we go below the March high of 18466, now the key support to watch.

However, for things to turn bearish, we will still need to see some confirmation, such as a breakdown of the bullish channel or the formation of a lower low – with the most recent low coming in at 18188. Such a scenario could then pave the way for a deeper correction that may last for several days, as the bulls rush for the exits.

That being said, the trend is clearly bullish, and buying the dips is arguably investors’ preferred strategy given the shallow pullbacks we have seen all year. The bullish price action has been highlighted by the Nasdaq 100 mostly sticking around its 21-day exponential moving average, which is a key short term trend indicator. As traders, fighting the trend as strong as this doesn’t make any sense without confirmation or unless done so selectively in the right moments.

For more updates on the Nasdaq 100 forecast and analysis, stay tuned to our latest reports and insights.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

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