Nasdaq 100 Off Session Lows As Long Term Bond Yields Drop

Summary:
• The Nasdaq 100 index is off session lows after US long-term bond yields retreat from recent highs above the 4% mark.

The Nasdaq 100 index started the trading day lower but has recovered from session lows and now trades 0.58% higher. This bounce prevents the Nasdaq 100 from tumbling to 2-year lows and comes as long-term bond yields pull back from recent highs. 

The Nasdaq 100 index has been under pressure for several weeks as the Federal Reserve’s hawkish actions have caused a shift in investment flows from the stock market to the bond market and other money market instruments. 

The US 10-year Treasury Notes broke above the 4% mark for the first time in 12 years, as investors prepared for a new round of interest rate hikes by the Fed after comments on Tuesday from St. Louis Fed President James Bullard sparked fresh rate hike bets.

However, the bond yields on the 10-year Treasury have given up earlier gains and are now down 4.66%, sending the rates down to 3.763% as of writing. Some of these are close to 2-year lows and are relatively cheap compared to where they were last year. This has allowed for renewed interest in Nasdaq-listed stocks.

Also helping to calm nerves in the market is the move by the Bank of England to introduce some stability in the UK markets this Tuesday. The BoE responded to the crash of the British Pound following sweeping tax cuts by stepping into the bond market to arrest rapidly increasing borrowing costs. 

Nasdaq 100 Index Forecast

The price tested the 11075 support (17 June 2022 low) but failed to break it down. A subsequent breakdown of this price pivot takes the index to the 23 September 2020 low at 10698. Below this level, the 24 July 2020 low at 10328 forms an additional target for the bears.

Further price deterioration makes the 10147 support (10 June 2020 high) a new downside target, leaving the 29 June 2020 low at 9750 to form an additional harvest point for the bears. On the flip side, the bulls need to extend the bounce further north to target the 11480 resistance (13 July low and 27 September 2022 high).

A break beyond this point makes 11701 available as a further northbound target (12/19 May and 16 September 2022 lows). If the bulls uncap this barrier, they will have clear skies to aim at the 12186 price mark (8 July and 15 September 2022 highs). 12574 (30 May and 13 September highs) constitute an additional price target to the north if the advance continues.  

Nasdaq 100: Daily Chart