The Nasdaq 100 index fell nearly 1% on Thursday after the Federal Reserve announced that it would start selling its corporate bond holdings on 7 June. This move marks the start of the termination of its emergency corporate credit facility.
Echoing the negative impact on the risk-sensitive tech index, Bank of America analysts have said the move is “very negative for risk assets”.
The surprise announcement is already taking a toll on risky commodities as well. Bank of America says it is a sign of restoration to normalcy much earlier than expected, suggesting that rate hikes could be much faster in coming than markets have currently priced in.
Thursday’s decline completes the breakdown of the rising wedge on the daily chart, with the measured move expected to take the Nasdaq 100 index towards the 13344.2 support level. This move requires the bears to take out 13559.2. If the corrective decline is more extensive, we could see a further push south, targeting 13135 and 12973.
On the flip side, a bounce from 13559 truncates the completion of the measured move. This also allows the bulls to initiate a recovery towards 13761. Above this level, barriers exist at 13904 and 14078 (all-time high) before the Nasdaq 100 can see new highs.
