Market sentiment in the United States remains rosy throughout earnings season as NASDAQ, the Dow Jones and S&P500 all gained +3.52%, +0.70% and +1.59% last week respectively.
In terms of risk events for last week, there were two main things investors were keeping an eye on. Namely, earnings reports for Apple and Amazon as well as the US GDP numbers. Although NASDAQ climbed a monstrous 3.52% last week, Apple and Amazon (two of the biggest constituents in NASDAQ) both failed to meet their earnings expectations resulting in their stock price lowering after hours. With the US GDP numbers coming in well above target, this seemed to have steadied investors nerves as we closed out the green week.
Although supply chain issues and elevated inflationary pressures continue to weigh on market sentiment, forecasts remain “positive” going into the rest of Q4. Earnings reports will remain relevant in the short term outlook, but all eyes will be on the FOMC Monetary Policy decision on Wednesday as well as NFP data being released on Friday. As per usual, investors will looking to monitor the health of the labour market with many hoping to see a number above 500k to remain positive.
With regards to the FOMC Meeting, they are planning to announce the beginning of tapering bond asset purchases. Now while this might not bring much short term volatility to the market, the overall tone of the meeting could dictate a sell-off in risk assets or a continuation. Fundamentally, Fed tapering and a rise in yields should affect tech evaluations, but in my opinion, any pullbacks would be transitionary.
Looking at NASDAQ on a technical front, price has managed to break above the inflection zone highlighted in last week’s blog post and has printed a new ATH. We saw 2 days of indecision around the previous ATH before price eventually printed that bullish engulfing. In terms of short term outlook, the path of least resistance seems to be upside as usual. Next target being the psychological level of $16 000. Should fundamentals come into play and we see that short term pullback, we can look at $15 700 as the first level of potential support followed by $15 600.
The Dow Jones has enjoyed a string of good days for the past two weeks as bulls have taken control and simply looked to the upside. The only form of a pullback seen was down to $35 500 before price reached the $36 000 mark. As we all know, price cannot continuously climb without seeing a healthy retracement which could be coming in days to come. Should this happen, we can expect the first level of support to be around the psychological level of $35 500. Should price drop any lower, we can expect our long term daily trendline to act as a form of dynamic support.
As always traders, exercise healthy risk management and we hope you have a fantastic trading week ahead. For more updates like the one above, subscribe to our blog for instant updates to your mail or join our Telegram Trading Floor via our website at http://www.aspirefx.co.za.