Basic Overview
At one point, it looked like the worst was over, with the Nasdaq up nearly 5% in a single day following the Bank of Japan and FOMC decisions. Unfortunately, the next day we got the ugly US ISM manufacturing PMI, which sent the market into a defensive and risk-off mood ahead of the US nonfarm payrolls report.
The US jobs report didn’t help as the data came in as a surprise to the downside with the unemployment rate jumping to a completely unexpected 4.3%. The losses continued and we eventually saw a massive sell-off overnight with the Nikkei crashing 12% in a single day.
At the height of risk aversion yesterday, markets saw the Fed cut rates by 136 basis points by year-end, and some possibility of an emergency rate cut. Fear is generally a stronger emotion than greed in markets. Despite the volatility calming down a bit, markets are still pricing in a 50 basis point cut by the Fed in September and a total of 110 basis points by year-end.
Nasdaq Technical Analysis – Daily Time Frame
Nasdaq Daily
On the daily chart, we can see that the Nasdaq eventually broke the trend line around 18,900 and extended the sell-off to the next major trend line around 17,400. Here, buyers stepped in with defined risks below the trend line to position themselves for a rally to new highs. Sellers would need the price to break below the trend line to increase bearish bets to 16,000 after that.
Nasdaq Technical Analysis – 4-Hour Time Frame
Nasdaq 4 hours
On the 4-hour chart, we can see that we got a trick last week when the price broke the 19,300 resistance level and the trend line but then dropped back below it as the US ISM Manufacturing PMI came in below expectations by a large margin.
From a risk management perspective, sellers will have a better risk-reward setup around the recent swing low at 18,800 where we can also find the 61.8% Fibonacci retracement level of confluence. On the other hand, buyers will want to see the price break the 18,800 resistance level and rise above the previous trend line to gain more confidence and increase bullish bets to new highs.
Nasdaq Technical Analysis – 1 Hour Time Frame
Nasdaq 1 hour
On the 1-hour chart, we can see that the price has been making higher highs and higher lows on this time frame as buyers have piled in around the major trend line. At the moment, we are seeing some weakness but if the price drops to the 17,900 support level, we can expect buyers to step in with a defined risk below the support to position a suitable position for a rally to the 18,800 level.
On the other hand, sellers will want to see the price break the support level so they can accumulate money and move in preparation for a break of the main trend line. The red lines mark the average daily range for the day.
Upcoming incentives
This week is essentially a data-free week. There will be no significant economic release until Thursday when we get the latest US jobless claims figures. The market will also be paying close attention to comments from Fed members given recent market developments.