Source: PaxForex Premium Analytics Portal, Fundamental Insight
The US Richmond Fed Manufacturing Index for December is predicted at -7. Forex traders can compare this to the US Richmond Fed Manufacturing Index for November, reported at -11.
This trading week has begun with little economic data to sway bulls or bears, allowing traders to focus on individual developments in the stock market. The NASDAQ100 powered to fresh all-time highs, following the Dow Jones Industrial Average and the S&P500. The consensus is that the US economy will avoid a recession and that the US Federal Reserve will cut interest rates this year. Lower interest rates benefit debt-heavy tech companies, providing a tailwind for the NASDAQ 100. Inflation remains a threat, and most investors have become complacent about the ongoing risks and upside inflationary pressures.
Fourth-quarter earnings season could come in better than expected, given a resilient consumer that maxed out debt capabilities. Countering a potentially weak US consumer in 2024 are trends in artificial intelligence, but the market rally to all-time highs lacked breadth. The transportation sector flashes signs of caution, supply chain issues remain due to geopolitical tensions, especially in the Middle East, and corporate outlooks could be more cautious.
While the headlines appear rosy, there are cracks underneath, and rather than jumping on the bullish bandwagon, investors should consider their portfolio positioning. A defensive strategy for the first half of 2024 could outperform a tech-heavy portfolio. US equity markets are overpriced, and the wall of worries could collapse with each trading session unless a fresh bullish catalyst emerges.
The forecast for the NASDAQ100 turned cautiously bearish, with price action climbing a wall of worries. This tech-focused equity index trades at resistance with fading upside momentum. The Tenkan-sen and the Kijun-sen have flatlined, suggesting more volatility ahead, as bulls and bears will square off and fight for control. The Ichimoku Kinko Hyo Cloud has also flatlined and could narrow, with the Senkou Span A shifting lower and the Senkou Span B drifting moderately higher. Traders should also monitor the CCI in extreme overbought territory. A negative divergence has formed over the past four weeks. A breakdown by this indicator below 100 could tip the scale into the bearish camp and trigger a profit-taking sell-off. Can bears overpower bulls and regain control over the NASDAQ100 to force price action into its horizontal support area? Subscribe to the PaxForex Daily Fundamental Analysis and earn over 5,000 pips per month.
Should price action for the NASDAQ100 Index remain inside the or breakdown below the 17,300 to 17,400 zone, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 17.365
- Take Profit Zone: 15.690 – 16.180
- Stop Loss Level: 17.470
Should price action for the NASDAQ100 Index breakout above 17,400, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 17.470
- Take Profit Zone: 17.555 – 17.600
- Stop Loss Level: 17.400
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