The Nasdaq 100 closes flat amid higher Treasury yields. Is the Santa Claus rally over?
NASDAQ 100 OUTLOOK:
- US stocks are settling in a bit higher Wednesday, but the bullish momentum seems to be fading
- Nasdaq 100 ends day flat as higher Treasury yields limit appeal of tech games
- Investors appear to be turning to quality stocks, but it is too early to draw any major conclusions as low market participation during the holiday season can skew results.
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U.S. stocks set a twist higher Wednesday amid investor cautiousness and dwindling liquidity ahead of the New Year’s holidays.
AT the closing bell, the S&P 500 gained 0.15% to end the day at 4.793, slightly below the intraday high of 4,807 reached on Tuesday. Elsewhere, the Dow Jones rose 0.25% to 36,488, a record high for the blue chip index. Meanwhile, the Nasdaq 100underperformed the big one landmarksand was flat on the session, finishing to 16.491, contents by a sharp rise in US Treasury rates, the 10-year rate at the topseven basis points at ~1.55%, its highest level since November 29.
TThe Santa Claus rally, which led the main averages to new or near records, appears to be lose momentum and Running out of gas as investors start to turn to quality stocks and become more defensive, but it’s too early to pull serious conclusions, because the low participation in the market during the holiday season can distort and blur the underlying image (For reference, trading volume hit its lowest level of the year on Tuesday).
Next week, when most traders return to their desks after the holiday break, we should have a clearer picture. sense general sentiment and how stocks might trade in early 2022. That said, omicron remains a joker, but the data suggesting the heavily mutated variant is not as severe as the previous strains creates a bullish bias for risk assets. There will be a lot of pandemic-related information to digest in the coming weeks, but traders should pay less attention to new cases and focus on hospitalizations and deaths. If the latter two indicators remain low, consumer and business sentiment should improve, paving the way for higher stock prices, especially the reopening names.
In the New Year, Wall Street is also expected to become more concerned about the Fed’s monetary policy. position, even more after the The FOMC has accelerated its reduction schedule and signaled, via his dot-plot, that he will hike the federal funds rate three times over the next 12 months to counter inflation.
As the central bank take-off approaches, stocks could come under pressure, especially expensive technology, and growth companies with exorbitant multiples. In general, higher borrowing costs undermine valuations by increasing the discount rate for future cash flows, a conventional technique for valuing stocks. In this context, the Nasdaq 100 could trade on the rear foot in early 2022, but the moD speculative corners of the market could be the most affected (ARKK, for example, is in a very precarious position).
NASDAQ 100 TECHNICAL ANALYSIS
The Nasdaq 100 has retreated recently, and he is now sitting in support near the 16.450 Brand. If sellers manage to break through this zone, the index could retreat towards 16,200, before attacking the next critical low near the psychological level of 16,000.
On the other hand, if the bullish momentum pick up the pace and the Nasdaq 100 swivels higher with conviction, technical resistance can be seen at 16,765, the highest record. If the buyers push the price above this barrier, we may see a move towards channel resistance at 17,100 over the next few days.
NASDAQ 100 TECHNICAL ANALYSIS
Nasdaq 100 Chart (NDX) prepared in TradingView
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— Written by Diego Colman, contributor