Market Analysis

NASDAQ 100: Weakening optimism in US-China trade negotiations led to a choppy day

The NASDAQ 100 oscillated between positive and negative territory after failing to withstand the opening rally driven by weakening optimism regarding the progress in US-China trade negotiations. Although signs of softening stances have been welcomed by investors, other worries have kept investors spooked due to uncertainty on both domestic and international concerns.

Investors remain searching for a catalyst to set a more consistent trend in motion. The spark may come in the form of good economic data or more clarity on the Federal Reserve (Fed) intentions for next year or more certainty in US-China trade.

Market analysts are roughly expecting a 25 basis points (bps) rate increase on next Wednesday, December 19 as the US economy is booming, inflation is at or above the 2% Fed’s target and the jobs market is finally generating wage pressures. The forecasts show Fed officials expect about three rate rises in 2019 and one more in 2020, which would lift the bank’s important federal funds rate to about 3.4% that year. Higher interest rates make borrowing more expensive, slowing economic activity and curbing price inflation. There have already been slowdowns some sectors in the US, such as home and car sales, where higher interest rates have led some price-conscious consumers to pull back.

The initial jobless claims in the US fell by 27K to 206K in the week ended December 8, comparing to the previous week’s upwardly revised data of 233K. The numbers came below analysts’ estimates of 225K.  Claims declined for the second straight week and by the most since April 2015, approaching a nearly 49-year low.

The continuing jobless claims in the US rose by 25K to 1,661K in the week ended November 31, comparing to the previous week’s upwardly revised data of 1,636K. The numbers came above analysts’ estimates of 1,650K. An increase in this indicator has negative implications for consumer spending which discourage economic growth, representing a weakness in the labour market.


Top NASDAQ 100 Gainers and Losers yesterday:

JDcom (3.75%), Tesla (2.78%), Netease (2.53%) among the top NASDAQ 100 gainers for the session.

MercadoLibre (-7.71%), Monster Beverage (-6.98%), American Airlines (-5.50%) were among the worst NASDAQ 100 performers of the session.

Since the beginning of 2018 until last Thursday close, the US Technology index remains positive with a gain of almost 5.4% but since the start of December, dropped nearly 4.3%. Nonetheless, the week began on the right foot with a rise of more than 2.0% and on the daily basis closed shy in the red with 0.32% loss. Furthermore, the NASDAQ 100 is in a bearish phase since late November, after the death cross.

On yesterday session, the NASDAQ 100 initially rose with a narrow range but found enough selling pressure near the 6,837.75 to trim all of its initial gains and closed near the low of the day, in addition, managed to close within Wednesday range, which suggests being slightly on the bearish side of neutral.

The stochastic is showing a weak bullish momentum although is below the 50 midline.

The US Technology index ended November on a positive note, which tried to carry on into December. However, the NASDAQ 100 faced a strong selling pressure by the confluence of the daily resistance at 7,047.00 plus both daily moving averages (50 and 200) at the time 7,057.23 and 7,100.32 respectively, definitely a key zone to remember. The index seems to have found buying pressure near a daily support at 6,545.50 which is also convergent with 6,449.5 November low. In fact, we could say that the US Technology index is in a sideways correction trading within a well-defined range with a resistance at 7,047.00 and a support at 6545.50 but seems to be suffering some downward pressure by the 10-day moving average.

UsaTec is a CFD written over NASDAQ 100 futures.


UsaTec Dec ’18 Daily Candlestick Chart

UsaTec Dec ’18 Daily Candlestick Chart


Market Events to Watch:

Friday, December 14 at 13:30 GMT (08:30 PM ET): The US Census Bureau is scheduled to release the US retail sales month-on-month in November which is expected to drop to 0.2% comparing to 0.8% registered in October. A high reading is seen as positive for the USD, while a low reading is perceived as negative.


Written by Hugo O’Neill, External Analyst


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