After the big rally that followed the US CPI report miss, market momentum showed signs of fading as it neared a crucial resistance level and started to pull back. Despite this, the data still supports the soft landing narrative with last week’s data US retail sales and Unemployment claims exceeding expectations.

As we approach the FOMC rate decision, some investors may engage in profit-taking or take defensive positions, potentially adding to the current market pullback. However, if the data continues to show a resilient economy, we should see declines in buying the Nasdaq Composite.

Technical Analysis of the Nasdaq Composite – Daily Time Frame

Nasdaq Composite Daily

On the daily chart, we can see that the price started to decline from the 14448 level as the market did not sustain the upward momentum until the FOMC meeting this week. We have a strong level of support at the previous resistance of 13862. In fact, we can see that we will have a confluence with the red moving average of 21, which last provided a lot of support.

Nasdaq Composite Technical Analysis – 4 Hour Time Frame

Nasdaq Composite 4 hours

On the 4 hour chart we can see that we will also have a confluence with 50% Fibonacci retracement level and trend line that defined ascending triangle pattern. Here, we should expect buyers to enter with defined risk below the trendline and target resistance at 14649. Sellers, on the other hand, will want to see the price decline to accumulate and extend the fall to 13174 support.

Nasdaq Composite Technical Analysis – 1 Hour Time Frame

Nasdaq Composite 1 hour

On the 1-hour chart, we can see a closer look at key support to watch. Here, the fight between buyers and sellers will decide where the price will go next. A bounce should lead to 14649 resistance, while a break below should lead to 13174.

Upcoming events

A number of market-moving events will hit the market this week. Starting today, all eyes will be on the US PMI and depending on whether the data beats or falls short of expectations, we could see the market rise or fall. The Fed is expected to hike by 25 bps on Wednesday, bringing the FFR to 5.25-5.50%. This decision should not have a big impact on the market as it is widely expected.

On Thursday we will see the latest US Jobless Claims, where positive data is expected to lead to a rally, while a negative result could lead to a sell-off. At the end of the week, attention will turn to the US PCE and ECI reports, with the market looking for softer numbers to confirm the soft landing narrative.

Source Link