NASDAQ 100 OUTLOOK:
- Bullish sentiment resumes on Wall Street on Thursday after choppy price action on Wednesday
- Major stock indices end the day with solid gains, but the Nasdaq 100 jumps 1.15% to 15,778, a record close for the tech benchmark
- Earnings, fiscal and monetary policy, and the October NFP report will be the center of attention in the near-term
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After a sluggish performance on Wednesday, U.S. stocks powered higher on Thursday as stellar earnings from major companies outweighed concerns about slowing activity, supply chain woes and red-hot inflation. Automaker Ford, for example, shattered Wall Street consensus, beating top line projections and nearly doubling the EPS expectations while reinstating its dividend and raising guidance – a sign of confidence in the U.S. economy even in the face of looming headwinds.
Of all S&P 500 members that have announced their results so far, more than 80% have surpassed forecasts, a figure above the long-term average and a clear indication that corporate America remains healthy and has been able to successfully navigate the current challenges.
On a different front, weaker than anticipated third quarter GDP raised some worries, but failed to dent positive sentiment and strengthening risk-appetite, especially as newer data showed that labor market conditions continued to improve this month. For instance, unemployment claims dropped to a fresh 19-month low of 281,000 in the week ending October 23, reinforcing expectations that employers may be adding workers at a faster pace as COVID-19 anxiety recedes.
When it was all said and done, the S&P 500 climbed 0.98% to 4,596, a hair’s breadth away from its intraday record set earlier in the week. Elsewhere, the Dow Jones rose 0.67% to 35,729, while the Nasdaq 100 surged 1.15% to 15,778, an all-time high, supported by big gains in Tesla, Microsoft, and Apple shares.
Strong corporate earnings and a benign fourth quarter profits outlook, despite rising inflationary pressures and supply chain hurdles, should support stocks in the latter part of the year, but for the bullish scenario to play out meaningfully, the economic recovery must stabilize, and markets need clarity on the fiscal and monetary front. That said, we should have more information in the coming days on Biden’s Build Back Better agenda as it makes its way through Congress and on the Fed’s tapering plans. Finally, next week’s NFP data will also be key for investors as the report will provide insight into the health of the labor market rebound. A good print above 500,000 will likely be needed to boost optimism and prolong the rally on Wall Street.
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NASDAQ 100 TECHNICAL ANALYSIS
From a technical point of view, the Nasdaq 100 maintains a positive bias after bouncing almost 10% from the October trough and setting higher highs and higher lows sequentially in the last few weeks. Despite the bullish price action, the tech index has become overbought as shown by the 14 period RSI, a sign that a pause or a pullback could be around the corner; after all, no rally ever follows a straight line. In this context, if buyers start liquidating position to take profits and price corrects lower, support appears at 15,530, followed by 15,325. On the flip side, if upside pressure fails to extinguish and the index continues to charge higher, we’d be in uncharted territory, but Nasdaq 100 could encounter resistance near 15,900, the upper boundary of a short-term ascending channel.
NASDAQ 100 TECHNICAL CHART
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—Written by Diego Colman, Contributor