Key Points
- Easing inflation buoys stocks.
- Markets still betting on 2024 cuts.
- Fed members push back.
- NASDAQ to continue higher?
Week Overview
It has been another fascinating week in the markets. Tuesday’s Producer Price Index data came in hot, but the downward revisions stole the show as the dollar slid. This slide continued when Wednesday’s US inflation report showed inflation was easing, albeit at elevated levels.
As a result, all three of Wall Street’s major indexes exceeded all-time highs, with the NASDAQ 100 and S&P500 leading the way with 1% gains immediately after the report. The Dow Jones also surged toward the 40,000 milestone. It is safe to say the bulls won this week!
Fed Members Are Pushing Back
Despite the markets being happy with how things are going, the language from most Federal Reserve members is in contrast. Yesterday, we heard from Bank of Cleveland President Loretta Mester, who stressed that we need more evidence to suggest inflation is falling and that rates should be higher for longer. Bank of Atlanta President Raphael Bostic made it clear he believes there is still a lot of pricing pressure in the economy.
Today, we will hear from FOMC members Daly, Kulger, and, more importantly to the markets, Waller. He is on the board of governors and is widely regarded as one of the most prominent hawks. Therefore, hearing what he thought of the recent inflation print will be interesting. Any dovish tone from Waller is likely to continue the NASDAQ 100 rise.
NASDAQ To Continue Higher
As predicted in the previous article, the NASDAQ showed bullish signs after a reaction from the H4 order block at 17400. This now feels a long way away, with the price surging by over 1000 points since then. The previous all-time high was at 18446, and the question is how long until traders witness 19000?
The more aggressive trader may look for a simple filling of the Fair Value Gap, which sits right on the previous all-time high. This would also act as a break and retest trade, and if stocks are going to continue this fantastic run, you can see there isn’t much retracement to work with.
More patient traders may look for a deeper retracement, with 18000 being a psychological support area. This move down to 18000 would be supported if the Federal Reserve dampened the prospects of cuts this year at any point, but this remains a market that defies all expectations. Any trader trying to sell this index has a tough time.
Risk Disclosure: The information provided in this article is not intended to give financial advice, recommend investments, guarantee profits, or shield you from losses. Our content is only for informational purposes and to help you understand the risks and complexity of these markets by providing objective analysis. Before trading, carefully consider your experience, financial goals, and risk tolerance. Trading involves significant potential for financial loss and isn't suitable for everyone.
