Remarkably, technology stocks surged higher after Wall Street opened for trading,
despite the hawkish Fed yesterday. It looks like investors have preferred to move back into growth stocks, presumably because they believe that the economy will continue to outperform in the months ahead, even if it eventually means higher interest rates. But this argument doesn’t seem right to me. I would be wary of an equally sharp drop should bond yields start moving higher again. Given the sharp dollar rally, I wouldn’t bet against rising US yields. So, it is possible today’s tech rally my fade, possibly as early as later in the day.
Technically, the Nasdaq 100 is still looking strong as it has just broken to a new record high and given the fact that it continues to break resistance despite bearish news flow. But with the Relative Strength Index (RSI) being in a state of divergence, watch out for signs of bulls becoming trapped above old highs on the lower time frames. One such level is the previous all-time high at 14162. Another similar level is at 14100, the high from Wednesday. A move back below the latter would be a bearish outcome in my view as it would point to a failed breakout attempt. But for confirmation, the bears will need to see a lower low and the breakdown of some support levels, including the key 13825 level, where the selling ended yesterday. If this level gives way, then we could see the onset of a sharp sell-off as the buyers rush for the exits. But first thing is first, let’s wait and see if the index does indeed fail to hold the breakout.
Source: ThinkMarkets and TradingView.com
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
Learn and earn more today.
Visit our Education Centre