nasdaq 100
The Nasdaq 100 continues to add to the all-time highs attained yesterday, in expectation of a dovish statement from the FOMC later today. Analysts do not expect a change in interest rates; the FOMC Chair Jerome Powell has ruled out negative rates in previous comments. Emphasis is therefore on the statement, press conference and report of economic projections.
Nasdaq 100 futures are up 0.68% on the day as listed stocks continue to be the toast of traders and investors. Expectations that the Fed would expand, or at least continue to provide cheaper funding windows for businesses and investors continue to drive demand on shares listed on the US exchanges, especially the Nasdaq 100. A cheaper US Dollar is also allowing more significant investment flows into US markets.
Also, the reopening New York, which is the financial capital of the US, seems to be doing the markets a lot of good. Domestic riots have virtually ceased, and attention seems to have shifted back to the expectations of an economic rebound. How will the markets respond to today’s FOMC statements?
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The rallies in the Nasdaq 100 and other US markets have been fuelled solely by the actions of the Fed in combating the negative economic impact of the coronavirus outbreak. The coronavirus pandemic is, however, showing no signs of abating. The US economy continues to rely on life support provided by the Fed; stopping or reducing the flow of the wonder drug of economic stimulus is about the main thing that would engineer a selloff on the Nasdaq 100. This effect is not what the Fed wants at the moment, which is why the expectation of a dovish statement is high. If this plays out as expected, the Nasdaq 100 may continue its ascent towards the next resistance at 10,291.5 (227.2% Fibonacci extension of the swing from 6 March to 23 March 2020). Even a slight pullback to the previous high of 20 February or the support levels of 9626.4 and 9452.0 could represent opportunities to buy on dips, as has been the case in May 2020.
A hawkish Fed may provoke a market selloff. Such a selloff needs to break down the channel’s lower border to bring in 9264.4 and possibly 9167.4 and 9092.3 into play. A drop below 8945.7 could accelerate this selloff, as this would truncate the higher lows that have supported the higher highs in the uptrend.