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US STOCKS OUTLOOK:
- U.S. stocks mixed Wednesday amid hawkish central bank remarks
- Fed Chair Powell doubles pledge to restore price stability, doesn’t signal dovish wave despite growing
- recession risk
This article looks at key technical levels for the Nasdaq 100 over the next few days
Most Read: Nasdaq Price Outlook – Recovery Backs Down Ahead of the Third Quarter Open
U.S. stocks were subdued on Wednesday as traders remained reluctant to buy dips and take unnecessary risks amid mounting economic headwinds, including persistently high inflation and a rapid slowdown in economic growth. On a related note, the S&P 500 fell 0.07% to 3,818, its third straight monthly decline, despite speculation that quarter-end pension fund activity would boost demand for stocks and push shares higher this week. The Nasdaq 100 edged up 0.18% to end at 11,658, just above key technical support.
Fears about the outlook intensified after Fed Chairman Jerome Powell pledged to use the tools at his disposal to bring inflation down to 2% and said the biggest mistake was to abandon expectations, a sign that policymakers will continue their plans – rate hikes are loading .
The aggressive normalization cycle the central bank is considering could derail the recovery and increase the likelihood of a hard landing, a scenario that could wreak further havoc on equities. While the balance of risks around economic growth has deteriorated, the Fed has yet to blink, a sign that the agency is prioritizing restoring price stability over cost, at least for now.
Tighter financial conditions and extreme pessimism will exacerbate short-term volatility and prevent a meaningful and sustained recovery in equities.
The investment climate may deteriorate before it improves. As second-quarter earnings season looms, traders should brace for the possibility of weaker earnings and poor corporate forecasts amid shrinking margins and rising recession risks. If that happens, we could see further losses on Wall Street in the weeks and months ahead before risk assets start bottoming out.
Looking ahead, the last two days of the week have major events on the U.S. calendar. However, the core PCE report for May, the Fed’s favorite inflation gauge, is due tomorrow. Meanwhile, the June ISM manufacturing survey is to be released on Friday. Volatility could rise if the end result differs significantly from consensus expectations, with a drop in liquidity ahead of the U.S. bank holiday weekend exacerbating price swings.
NASDAQ 100 TECHNICAL ANALYSIS
The Nasdaq 100 rebounded strongly last week, but sellers have resurfaced as the index hit a key resistance area near 12175/12225, halting bullish momentum and paving the way for a sharp bearish reversal earlier in the week. Following recent moves, the Nasdaq 100 was just above key technical support at 11,500. If that bottom line is breached in the next few days, traders should brace for the possibility of a retest of the 2022 lows. On the other hand, if the downward pressure eases and the bulls succeed in triggering a rebound, initial resistance lies at 12175/12225, followed by the 50-day SMA. With further strength, the focus will be on 12,600.
NASDAQ 100 TECHNICAL ANALYSIS
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