The Nasdaq is trading at a fresh session low and its lowest since August 12. The move lower is due to a mixed/weaker US jobs report. Nonfarm payrolls rose less than expected (142K vs. 160K expected) with prior months also revised down by 86K. The unemployment rate fell to 4.2% from 4.3% giving some “discrepancy” to the numbers.
Speaking immediately after the report, Fed Chairman Williams initially did not comment on a 50 basis point rate cut when the central bank meets on September 18, disappointing the market. He now says he is not sure whether a 50 or 25 basis point rate cut is on the cards.
There is a 63% chance of a 1 basis point rate cut on September 25, and a 94% chance of a 50 basis point rate cut in November.
The Nasdaq is now down -332 points or -1.96% at 16,788.
Technically, looking at the hourly chart, we recall that the corrective move to the upside was halted yesterday at its 200-hour moving average, which is currently at 17,272.22. This gave the sellers the advantage ahead of the jobs report. Today’s high could only reach 17,166.54, which is comfortably below its 200-hour moving average. Sellers entered the market and have since pushed the price below the 16,984-17,034 swing zone target.
Recently, the midpoint representing 50% of the upside move from the August low to the August high at 16861.39 was breached. Reaching and holding below this level would be more bearish and would prompt traders to look at the 61.8% retracement level at 16589.32.
Remember that the stock’s lowest price was 15,708.54 on August 5. That was the day when Japan’s Nikkei 225 index fell -12.4% in a single day.
So there is some room between this year’s low and the current price. The question is, was this early August pullback an overreaction to the carry trade unwind?
Note that the day before the August 5th drop, the low reached the 61.8% retracement target shown above at 16589.32. This makes the levels even more important going forward. If the carry trade liquidation is an overreaction, it may be a good target to look forward to, but it is also a level where buyers can dive into.