Source: PaxForex Premium Analytics Portal, Fundamental Insight
Investors continue to pile into the AI trend and push Nvidia and a few other companies to all-time highs, driving the NASDAQ100 to its all-time highs. While the AI boom has more room to run, it does not reflect the current state of the economy, which struggles with rising headwinds. The breadth of the market rally, fueled by the Magnificent Seven, is another area of concern, and earnings seasons this week could spark a risk-off sentiment.
After the US Federal Reserve slashed interest rates by 50 basis points, which benefits debt-heavy tech companies in the NASDAQ100, the central bank could pause in November, as core inflation remains sticky. A stronger-than-expected NFP report for October, scheduled for release on Friday, could sideline the US Fed and spark a violent 2%+ sell-off in the NASDAQ100. Despite the 50 basis point interest rate cut, Treasuries have increased, suggesting more underlying issues ahead.
The forecast for the NASDAQ100 has turned cautiously bearish due to extreme overbought levels with limited upside potential driven by several headwinds. The Tenkan-sen and the Kijun-sen have flatlined, suggesting the lack of short-term upside momentum. The Senkou Span A of the Ichimoku Kinko Hyo Cloud is showing early signs of a sideways trend, with the Senkou Span B moving higher, narrowing the cloud, and deflating medium-term bullish momentum. Traders should also monitor the CCI in extreme overbought territory. A breakdown below 100 could trigger a profit-taking sell-off, and this technical indicator has plenty of downside potential. Can bears regain control over the NASDAQ100 and 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 20,400 to 20,600 zone, PaxForex recommends the following trade setup:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 20.500
- Take Profit Zone: 19.020 – 19.335
- Stop Loss Level: 20.700
Should price action for the NASDAQ100 Index break out above 20,600, PaxForex recommends the following trade setup:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 20.700
- Take Profit Zone: 20.910 – 21.120
- Stop Loss Level: 20.600
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