Nasdaq 100 pushes higher as US markets brace for October CPI data

Nasdaq 100, US CPI, US Elections – Talking Points

• Nasdaq 100 extends gains past 11,000 ahead of US CPI data
• Tesla struggles after announcing recall of 40,000 Model S and Model X cars
• Meta continues to struggle after weekend layoff report

The Nasdaq 100 extended its recent rally on Tuesday as traders await the key October CPI report on Thursday. Stocks have rallied strongly in recent sessions as traders continue to reassess expectations of the Federal Reserve. While the terminal rate has risen, the expected pace of rate increases has slowed. This has seen yields and the US dollar weaken from recent highs, giving risk assets a boost.

The 2-year Treasury yield fell back below 4.7%, while the 10-year appears to be heading for a collision course for the 4% level. As a result, mega-cap tech stocks were broadly in the green in Tuesday’s session. Google is the top performer among the GAMMA+ crowd, while Tesla struggles to lose more than 4.5% on the session. Meta also remains under pressure following a weekend report of potential layoffs.

Popular Tech Stocks

Courtesy of TradingView

Markets may continue to show strength in the near term as bond yields rise. I would say that we are still in a “rates world” and everything still revolves around the bond market. As yields edged higher, a retracement of the recent decline could spell pain for markets that seem optimistic that the worst is in the rear view mirror. This picture may become clearer by the end of the week as Thursday’s CPI print could go a long way to settling the 50 or 75 basis point debate for the December FOMC meeting. Should the market feel the need to revalue its prices by 75 basis points, the recent gains in equities could fade.

Nasdaq 100 Futures (NQ) 2-Hour Chart

Chart created with TradingView

With that in mind, NQ has put together a strong rebound from the monthly lows below 10700. As we sit more than 4.5% off Friday lows, sentiment appears to have changed. Although there has been some chopping, this move over the last 3 sessions has been a steady advance above the 11000 threshold. If we can continue this bullish momentum, NQ may be looking to test the EMA from 21 days to 11229.

Overall, this trend might appear to be another test of the descending trend line from the August swing top. This trendline resistance marked the top in September and also failed to break in a test during the November 1st session. Bears may be patiently waiting to sell at higher prices, which may also partly explain the uptrend of recent sessions.

Should the CPI reverse this upward move, I would expect the psychological level of 11000 to offer little resistance if prices cascade down. There seems to be a big area for buyers between 10700 and 10800 as this area has acted as a buffer a few times now. I would expect this area to come under the microscope if NQ reverses course. A failure to hold this area and NQ could look to revisit pre-Covid highs.

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— Written by Brendan Fagan

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