Greetings trading fiends! It’s going to be a busy week for equities with central bank events and earnings reports ahead!
Will the volatility and fundies draw more sellers into the downtrend on NAS100, or will the bulls defend and push higher?
NAS100 1-hour Chart by TradingView
We’re gonna start the new week and close out the month of October with a fresh look at the Nasdaq 100 Index! Sellers have taken this over pair this month, fueled by high bond yields, geopolitical risks lifting risk aversion behavior, and bearish reactions to tech sector earnings.
And it looks like volatility is not ready to die down yet with the close of October as this week’s list of catalysts continues to remain heavy, most notably with the Federal Reserve’s latest monetary policy statement ahead, a potential for an escalation in the Israel-Hamas war, and more tech earnings ahead.
First, the Fed’s latest rate statement is coming on Wednesday, with high expectations that the FOMC will hold the targeting Fed Funds range between 5.25% – 5.50%. Now, with the recent U.S. data signaling both strong economic growth conditions and sticky inflation, there is a possibility the Fed will continue the hawkish rhetoric (i.e., open to further hikes, “higher for longer interest rates”), which could draw in further recession speculation and risk aversion behavior.
A more hawkish Fed would likely spark more weakness in equities, especially the tech heavy Nasdaq 100 Index, who are usually susceptible to rising interest rate expectations.
Second, the war between Israel and Hamas is likely to escalate this week as Israel ramps up its attacks on Hamas in Gaza. This not only raises the likelihood of more civilian casualties in the densely populated city of Gaza, but also makes it tougher for the conflict to be contained with Arab states and the U.S. more likely to be drawn in as time rolls along. A prolonged war seems to be the most likely scenario at the moment, especially with Israeli Prime Minister Benjamin Netanyahu making it clear today that Israel would not agree to a ceasefire.
Finally, the earnings season calendar is laced with some bangers this week, most notably Apple earnings, a company whose value is roughly 11% of the Nasdaq 100. A beat or miss in earnings there will likely get traders moving on NAS100, so their earnings report on Thursday will surely get trader hitting buy and sell buttons, depending on the earnings call.
We’re currently leaning bearish due to the high probabilities of a hawkish Fed statement on Wednesday keeping bond yields elevated, rising geopolitical risk lifting risk aversion sentiment, and the bearish price momentum on the chart above.
Currently the market is bouncing, but if bearish patterns form around the strong technical area of interest (falling moving averages, Fibonacci retracment, broken support area), that macro / geopolitical scenarios discussed above hold, and if traders are disappointed with Apple earnings, then NAS100 may draw in sellers this week.
And if that is the case, and given the daily Average True Range (ATR) of around 260 points, then a momentum move lower may take the index back to the Oct. 26 low and beyond, potentially the S1 Pivot support area before the end of the week.
Of course, if Apple and the rest of the tech sector hits the market with strong earnings, and/or positive developments emerge on the geopolitical front, then the current bounce may get to the R1 Pivot resistance level on the chart, breaking above the strong technical area of interest.
A sustained bullish break there and positive risk environment could prompt traders to push NAS100 as high as the 15,000.00 level by the end of the week.
So, stay on your toes with Nasdaq 100 and be ready to make moves because this Index loves to move. Wait for the best setups and which ever direction you choose, remember to practice proper risk management at all times!
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