OVER the past weeks, US markets have been rocked by the collapse of Silicon Valley Bank and other financial institutions facing issues. The Federal Reserve’s decision to continue the pace of rate hike by 25 basis points also added to the volatility.

However, going into the final week of the first quarter, investors seem to be shaking off the potential impact with more liquidity injected into the financial markets by the Fed and the US Treasury. Technology stocks recovered well in March with more investors going back to the longer-term playbook, and increased interest in stocks related to artificial intelligence.

Bullish scenario

The Nasdaq index saw a double bottom in October 2022 and January 2023, then recovered above the 12,000 level. A golden cross may be forming, with the 50-day EMA crossing above 200-day EMA. This is also the first time the levels have crossed since February 2022, where Nasdaq had a general downtrend till stabilising in January 2023. The current level of the index is at the 76.4 per cent level of the Fibonacci drawn, with potential upside back to 13,600-13,800 levels. However, there might be a slight correction back to the 12,500 region before the rebound.

Bearish scenario

The index has not yet fully broken the longer term downtrend since the end of 2021. If the index fails to break convincingly above the 13,000 level and more sudden news is announced regarding the financial markets, the index may see another correction back below the 12,000 levels due to the reliance on funding by many of the technology firms.

The writer is senior investment specialist, Phillip Securities