Nasdaq 100 analysis: Markets pull back despite Nvidia rally

It has been a rather mixed day for risk assets. Things started brightly for US markets, but at the time of writing the major indices were sharply either lower or in the case of the Nasdaq well off its earlier highs. We saw mainland European shares and US index futures rise in early trade on Thursday, with technology sector boosted by Nvidia’s earnings results that were published last night. As Nvidia extended its gains once the cash markets opened, so too did the Nasdaq, which traded in unchartered territories. But the S&P eased off its best levels after it too had hit a new high, while other indices like the Dow fell along with a drop in oil prices. Later, the risk off sentiment caused the Nasdaq to pull back from its best levels. The mixed performance of the indices underscores worries about interest rates outlook, after fresh data showed US business activity accelerated by most in two years as prices also picked up. Today’s other data releases were mixed, keeping investors guessing in so far as the Fed’s rate cuts are concerned. Our Nasdaq 100 analysis could turn bearish in the short-term outlook, if the index closes today’s session lower.

US services activity expands more than expected

In the US, the S&P Global manufacturing PMI was a tad better than expected with a print of 50.9 vs. an unchanged 50.0 reading expected. However, it was the services PMI which showed the much larger deviation from the previous print of 51.3, with a print of 54.8 – the highest since April 2022. This took everyone by surprise, causing bonds to slide and yields rose. What’s more, the S&P Global composite measure of input prices rose to the second-highest level since September.

Today’s other US data releases were mixed with jobless claims coming in slightly better than expected while new home sales disappointed.

But the net impact was a drop in bond prices and a rise in US dollar, which suggests investors are again pushing back their Fed rate cut expectations. If the major US indices close around current levels, it would paint a rather bearish technical picture for Friday.

Nvidia rallies 10 pc following earnings beat but other tech giants drop

Nvidia’s was up a solid 10% at the time of writing following its solid results after the market’s close yesterday. What the stock does from here will impact sentiment today and have a big influence on the direction of the Nasdaq. So, it would be a crime not to watch Nvidia shares when trading the Nasdaq.

Meanwhile all the other major tech shares were lower on the day, displaying uncompleted bearish candles on their charts. If they close this way, then this could potentially weigh on the Nasdaq as we head towards the end of the week.

Nasdaq 100 analysis: technical levels to watch

The Nasdaq 100 is continuing to make new highs, sitting comfortably above its 21-day exponential moving average. So, the trend is clearly bullish. But watch the close as several other tech shares have been falling today and this has caused the Nasdaq to come off its earlier highs, potentially on the verge of printing an inverted hammer candle. Looking at the other major indices, we can see quite bearish-looking candles. The Dow has broken a key support level around 38535; the Russell has broken a bullish trend line, and the S&P 500 was displaying an inverted hammer candle on the daily time frame.

Source: TradingView.com

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R