The Nasdaq 100 and S&P 500 sold off this past week, approaching multi-month lows on the back of soaring U.S. yields and rising conflicts in the Middle East. The ongoing earnings season that has just gotten underway has been mixed so far, with banks and technology companies posting decent results, but failing to push stocks higher.
Focusing first on Treasuries, government yields have been on a bullish tear of late, reaching highs not seen since early 2000 in many maturities due to benign macro data. The remarkable resilience of the U.S. economy is likely to lead the Fed to maintain a restrictive stance for an extended period in pursuit of price stability, creating a challenging setting for risky assets.
Geopolitical tensions have also ushered in a complex backdrop for the equity market. Israel was attacked by the militant group Hamas earlier this month, prompting Israeli Prime Minister Benjamin Netanyahu to greenlight a robust military response against the aggressors in the Gaza Strip. These chains of events have elevated the political temperature in the region, increasing global risk aversion.
With yields on the rise and geopolitics weighing on confidence, the S&P 500 and Nasdaq 100 will face a formidable challenge in staying afloat. To foster improved sentiment and infuse confidence into the market, Corporate America will need to deliver strong results for the third quarter, surprising Wall Street expectations to the upside.
NASDAQ 100 TECHNICAL ANALYSIS
After the recent market pullback, the Nasdaq 100 has fallen toward an important support area located around 14,575. Safeguarding the integrity of this technical floor is crucial, as a breakdown could embolden sellers to mount an assault on 14,245. In the event of a deeper retrenchment, the attention pivots to the 200-day simple moving average near 13,950, which harmoniously aligns with the 38.2% Fibonacci retracement of the October 2022/July 2023 rally.
On the flip side, if buyers make a comeback and trigger a bullish reversal from the index’s current position, the first resistance to consider appears at 14,875. Successfully clearing this key ceiling could rekindle upward pressure, setting the stage for a possible rally to 15,200, followed by 15,500.
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