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!

How to trade with City Index

Follow these easy steps to start trading with City Index today:

Open a City Index account, or log-in if you’re already a customer.
Search for the market you want to trade in our award-winning platform.
Choose your position and size, and your stop and limit levels.
Place the trade.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.