Nasdaq 100 hovering near record highs ahead of the Fed

As we noted last week, the Nasdaq 100 index has been lagging behind the other most-traded indices so far this year as traders rotate from fast-growing, technology-focused stocks to the more value-oriented “reopening” names that are more heavily-weighted in other indices.

That said, ongoing rotation between different sectors and indices is showing signs of shifting this week, with the Nasdaq 100 trading higher over the last two days while other US bourses like the Dow Jones Industrial Average (DJIA) and S&P 500 tick lower. More to the point, the Nasdaq 100 is testing its record high around 14,080 as we go to press, with a potential dovish Fed meeting looming as a possible catalyst to confirm the bullish technical setup (see our full FOMC meeting preview report for more on what to watch).

With another full month to go before we enter Q2 earnings season, the index is likely to take its near-term cues from the technical backdrop and macroeconomic developments; counterintuitively, weaker labor/consumer/inflation data could potentially boost prices for the index on the expectation of more stimulus from the Fed.

Looking at the chart, the Nasdaq 100 remains in a longer-term uptrend, with the 100-day EMA trending higher and providing support on dips for the past 14 months. Over the last month, the index has formed an accelerated bullish trend that is confirmed by a rising channel in the 14-day RSI indicator, signaling increasingly aggressive buying pressure of late:

Source: TradingView, StoneX

It’s notoriously difficult to project clear resistance levels when a market is in record high territory, but one tool that can traders set logical targets is the 127.2% and 161.8% Fibonacci extensions. Projecting these extensions off the two largest pullbacks we’ve seen year-to-date reveals two key areas of potential resistance: 14,400 and the 14,800-15,000 range. If we do see a bullish breakout in the coming days, Nasdaq 100 bulls may look to target these zones next.

On the other hand, a break below the near-term accelerated trend line would shift the near-term bias back to neutral for a possible retest of the 100-day EMA and longer-term bullish trend line. With a major fundamental event coinciding with a key technical “decision point” this week, Nasdaq 100 traders will have a lot riding on the developments over the next 48 hours!

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