Nasdaq 100 in consolidation phase
THE Nasdaq index had a stellar performance in the first half of 2023 with a rise of 31.7 per cent, marking its best performance since 1983. In comparison, the S&P 500 and Dow Jones Industrial Average had advanced 15.9 per cent and 3.8 per cent respectively. Nasdaq’s performance was evenly spread across the months, with only February marking a marginal loss.
The index’s outperformance was due to the expectation of the rate hike cycle ending soon. The performance of growth stocks, such as technology counters, is typically inversely related to the interest rate trajectory.
The remarkable performance in H1 was also led by a focus on artificial intelligence (AI), which pushed the performance of multiple related technology counters.
Bullish scenario
The double-top formation at the 15,285 level serves as a critical resistance point for the Nasdaq index. If the index manages to break above this level convincingly, it could signal further bullish momentum.
However, failure to breach this resistance level could result in increased selling pressure and a potential reversal.
If the index breaks above the current resistance level, the next key level to look out for would be around the 15,600-15,700 area.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
However, with the expectation of a 25-basis-point rate hike at the end of the US Federal Reserve’s July meeting, the upward momentum might be restrained until there is more clarity after the meeting.
Bearish scenario
The first support level is the 20-day exponential moving average (EMA) at the 14,840 area. If it fails to hold, a bearish scenario might be triggered where the 76.4 per cent Fibonacci level at 14,181 will become the next support zone.
This support zone will also coincide near the 50-day EMA level. However, the index has maintained above the 50-day EMA level since March 2023, and the overall bullish momentum is still strong for the index.
It is important to note that these scenarios are based on technical analysis, and market conditions can change rapidly. Traders and investors should closely monitor price movements and market developments to make informed decisions.
The writer is senior equity specialist at Phillip Securities
Copyright SPH Media. All rights reserved.
