All eyes will be on today’s Non-Farm-Payrolls release. The Nasdaq 100 has more to lose than most if the data surprises to the upside.
This afternoon’s important unemployment data follows hot on the heels of yesterday’s huge +978,000 ADP number.
Expectations are for the NFP to show an increase in job creation of around 400k in May. But following yesterday’s much better than expected print, the danger for markets is a similar beat today.
The Federal Reserve has painted itself into a corner. The huge CPI print in April points to runaway inflation. This increased calls for tightening monetary policy sooner rather than later.
Fed Chairman Jerome Powell calmed the immediate tightening fears and insisted that he would need to see an increase in labor market participation before that happened. Therefore, today’s data may be a turning point for markets.
The tech-heavy Nasdaq 100 relies on the abundance of cheap capital that has been introduced this year. This was evident in yesterday’s sell-off after the Fed announced the end of its emergency corporate credit facility.
The Nasdaq has remained in a broad uptrend since the 2020 crash. The money-printing aimed at fighting the economic implications of the covid pandemic has been a huge boost for the index.
This can also been seen in recent volatility as the market grapples with the prospect of policy adjustement.
If today’s data beat expectations by a wide margin, which I fully expect, the Nasdaq 100 will likely be in for a rough ride. My initial downside target is trend line support at 13,140.
The trend from the October lows has been a strong area of support in the last 7 months and therefore is an important level.
Of course, a weaker-than-expected release will have the opposite effect. In this instance, a close above 13,778 will have 14,000 as the logical stop.
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