NASDAQ 100 OUTLOOK:
- Nasdaq 100 jumps roughly 2.5% amid improved risk appetite on Wall Street
- Reports that Russia may be looking to ease tensions over Ukraine receive a warm welcome among investors
- U.S. retail sales and FOMC minutes will be eyed tomorrow
Most read: Section of Russian Troops Withdrawn – Gold, Oil, USD, JPY, EUR Immediate Response
U.S. stocks rose Tuesday in what appeared to be a relief rally, sparked by signs that geopolitical tensions may be finally beginning to ease. Earlier in the day, President Putin indicated that his government is ready for dialogue with the West on core security issues to resolve the current standoff. At the same time, the country’s defense minister said he has given orders for some troops to return to deployment bases after military exercises near the border have ended, an indication that Moscow may be backing off an immediate offensive and invasion of Ukraine.
Against this backdrop, the S&P 500 jumped 1.58% to 4,471, reclaiming its 200-day moving average and snapping a 3-day losing streak. Meanwhile, the Nasdaq 100, which plummeted more than 3% last Friday and was basically flat yesterday, rose 2.47% to 14,620, outperforming its major peers even in the face of higher long-term Treasury rates, with the 10-year yield above 2% amid mounting inflationary pressures.
Despite the positive sentiment on Wall Street, it is important to be cautious, as the crisis in Eastern Europe has not entirely gone away. For example, NATO Secretary General Jens Stoltenberg noted that Western officials have yet to see any de-escalation on the ground or a reduction in Russian military presence near the Ukrainian border, suggesting that the threat of conflict is still present. For this reason, traders should remain vigilant and limit upside speculation, at least until there are concrete indications that diplomacy has created a détente.
Moving on to other catalysts, January US retail sales, but more importantly the Fed minutes, will be closely watched on Wednesday. The FOMC account of its last meeting is likely to provide a greater degree of clarity regarding individual policymakers’ views on the pace of monetary tightening and whether there is willingness to front-load hikes next month amid red-hot inflation. If the minutes are perceived as hawkish, interest rates may reprice higher across tenors, dragging stocks, especially those in the growth and technology sector. This scenario could stop in its tracks the Nasdaq 100 recovery.
NASDAQ 100 TECHNICAL OUTLOOK
After a powerful rally on Tuesday, the Nasdaq 100 has cleared technical resistance near the 14,450 area, but to be confident in the rebound, we’d need to see a move above the 200-day simple moving average in the coming sessions. If this scenario plays out, the 50% Fibonacci retracement of the November/January decline at 15,222 would become the immediate upside focus.
In contrast, if sellers retake control of the market and the tech benchmark pivots lower, support is seen at 14,450. If the index falls below this floor, bears could attack the February low near the 14,000 psychological level in the near term.
NASDAQ 100 TECHNICAL CHART
Nasdaq 100 (NDX) chart prepared in TradingView
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—Written by Diego Colman, Contributor
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