Market Analysis

NASDAQ 100: Holding near a daily support on the busiest 3Q earnings week

The corporate earnings season is off to a strong start. With more than 15% of S&P 500 companies having reported, 83% have topped analyst expectations, according to FactSet.

Most of the focus will be on the FANG group of stocks. E-commerce giant Amazon, which weights 10.563% on the NASDAQ index, and Google parent Alphabet, weighting 4.656% on the NASDAQ index, are both due to release numbers Thursday after the markets close. FANG is the acronym for a basket of four large-cap stocks in the technology sector listed on the NASDAQ exchange comprising of Facebook, Amazon, Netflix, and Google, which investors relate synonymously with the performance of US equities.

Some of the other high-profile tech names reporting this week are Microsoft, Intel, Advanced MicrDevices, Twitter, Snap, Shopify, Grubhub, and iRobot.

The initial jobless claims in the US fell by 5K to 210K in the week ended October 13th, compared to the previous week’s upwardly revised data of 215K. The numbers came slightly below analysts’ estimates of 212K. The claims for South and North Carolina continue to be influenced by Hurricane Florence while Hurricane Michael hit the shores of Florida. A weaker than expected number indicates strength in the labour market, which in turn influences the strength and direction of the US economy.

The continuing jobless claims in the US fell by 13k to 1.640M in the week ended October 13th, compared to the previous week’s downwardly revised data of 1.653M. The numbers came below analysts’ estimates of 1.665M. A decrease in this indicator has positive implications for consumer spending which encourage economic growth, representing strength in the labour market.

A recent collection of positive data signaled that the US economy remains on solid ground, despite rising interest rates and global trade war tensions.

Since the beginning of 2018 until last Monday close, the US Technology index remains positive with a gain of over 11.5% but since the start of October, the NASDAQ 100 dropped more than 6.5%. Nonetheless, the week began on the right foot with a rise of more than 1.0% and on the daily basis closed green with 1.2% gain furthermore, it is in a warning phase since early October.

On yesterday’s session, the NASDAQ 100 opened with a downward gap of -0.43% and even tried to push downward. However, it found enough buying pressure near the daily support at 7,047.00 to trim all its losses and managed to close near the high of the day, although, closed within Friday’s range, which suggests being slightly on the bullish side of neutral.

The stochastic is showing a strong bearish momentum and is below the 50 midline, consistent with a bearish trend.

The US Technology index began October on the right foot, making a new year-to-date high at 7,728.25, however, it was short-lived, driven by a downward correction that accelerated on October the 10 yet found enough buying pressure near the daily support at 6,994.75 to bounce back up. The NASDAQ 100 is again pointing downward after a rejection on the key level at 7,356.60 although the current downward move seems to be slowing down. A key level to watch is October low at 6,907.75 and if the price holds, the NASDAQ 100 can develop a double bottom pattern, which suggests a reversal to the upside. On the other side of the coin, if the US Technology index breaks and follows through October low at 6,907.75 it might dive toward 100 Fibonacci expansion at 6,550.55

Watch out this week: Release of third-quarter earnings regarding over 150 US companies that will report corporate results in what will be one of the busiest weeks in the current quarter. On Thursday at 12:30 GMT (8:30 AM ET) features data on durable goods orders for September, which is expected to drop to -0.9% from 4.5% registered in the previous month. On Friday at 12:30 GMT (8:30 AM ET), investors should keep an eye on a preliminary reading of third-quarter US gross domestic product (GDP) looking for additional clues on the strength of the economy. The data is expected to show that the economy grew at an annual rate of 3.3% in the third quarter (July-Sept.) period, cooling from a growth of 4.2%, which was the strongest reading in four years.

UsaTec is a CFD written over NASDAQ 100 futures.


NASDAQ 100: Holding near a daily support on the busiest 3Q earnings week

UsaTec Dec ’18 Daily Candlestick Chart


Written by Hugo O’Neill, External Analyst


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