Nasdaq Bitcoin Gold Among Beneficiaries of Falling Price Expectations
- The interest rate increases may have ended
- Low- and zero-yielding assets continue to outperform expectations of falling interest rates
- Nasdaq in “Cup and Handle” breakout potential
The major US indices have all bounced back sharply after falling the previous day as the Fed’s dovish interest rate hike triggered profit-taking. We also see precious metals and base metals moving higher, along with Bitcoin and other cryptos. The US dollar has continued to weaken as the short end of the yield curve remains under pressure, with US 2-year yields falling below 3.90% today.
The market is therefore betting that we have reached a peak in terms of interest rate increases and that looser monetary policy should follow from here.
The Fed, SNB and BoE are all raising interest rates this week, but the message from these banks was the same: more increases can be required, not want be, if inflationary pressure persists.
With investors starting to price in interest rate cuts for later this year or early next year, this should help ease pressure on tech stocks, and support non-yielding assets such as gold and silver.
Nasdaq 100 Technical Analysis
The Nasdaq may be about to stage a more decisive rally as it continues to find support on the declines.
While Wednesday’s large bearish-looking daily candle formed around previous resistance area of 12850/900 seems quite bearish, the fact that we have had no downside follow-through suggests that the market is not willing to go lower.
Therefore, the larger “cup and handle” formation observed on the larger time frame still remains valid. The cup and handle formation is a bullish continuation pattern. The fact that the handle has a shallower dip than the cup portion of price action means that pressure is building for a bullish breakout.
The fact that the Nasdaq has managed to regain its 21-day exponential moving average and held above its 200-day moving average earlier this month is another sign of bullish strength.
So a bullish breakout could still be on the cards above 12885-12900 resistance area, as long as key support around 12600 to 12450 is defended by the bulls. If that happens, look for technical follow-through buys above that zone.
Only if the above 12450-12600 support area gives way will we turn bearish on the Nasdaq again, or if we observe an important reversal pattern at higher levels, whichever comes first.
— Posted by Fawad Razaqzada, Market Analyst
Follow Fawad on Twitter @Trader_F_R
