The NASDAQ continued its 4-week bullish trend and renewed its highs for 2023. The price is trading at the highest since August 14th, despite a slightly more hawkish Federal Reserve and the ongoing debt ceiling negotiations. Yesterday's price increased by a moderate 0.30% but increased by 0.70% as the US stock market approached. The component within the NASDAQ which saw the largest price increase was AMD, which rose by more than 4%. So far this year, Advanced Micro Devices Stocks have risen by almost 60%. Our market analysis below will dive deeper into understanding the NASDAQ.
The US Dollar and Debt Ceiling Negotiations
The US Dollar Index rose again during yesterday’s trading and continues to rise this morning. The index is currently trading at 102.76 and is 0.19% higher than the daily open price. The debt ceiling negotiations currently support the US Dollar, as the lower sentiment tends to support the Dollar and cash in general.
Nonetheless, all experts have advised it is certain the negotiations will produce an agreement, even if it is in the very last hour. The latest comments from House Speaker, Keven McCarthy, is that the two parties are still “far apart”, but an agreement is “possible by the end of the week”. Investors may become “nervous” if an agreement is not reached towards the end of next week.
Sticking points are that the Republicans want confirmation of no tax increases and more federal spending constraints. At the same time, the Democrats are looking to preserve the Inflation Reduction Act. Lastly, the hawkish comments from the Fed’s committee regarding interest rates. Again, this is something we will look at in more detail below.
NASDAQ - Cisco and NVIDIA in Spotlight
The NASDAQ has risen due to positive earnings, specifically within the technology sector and a break in the Fed’s hiking cycle. The NASDAQ continues to form a bullish trend pattern in both the medium-term and smaller timeframes, such as 30-minute charts. However, investors should be cautious that most wave theories state that the price can lose momentum and form a larger retracement or correction after the third or fourth wave. The 4-hour chart is creating its fourth impulse wave, and the 30-minute chart is forming its third.
However, as mentioned, the price continues to follow a bullish trend pattern and receives bullish trend indications from technical analysis. The NASDAQ has increased more than 23% this year, more than any other US index. This also may be something that longer-term "position investors" may be interested in, rather than just shorter-term traders. Another positive factor is that the trend is not only technical but is also supported by fundamental elements.
The index has been experiencing positive earnings across the board over the past month, and the market believes the Fed will not hike for 2–3 months at least. The only concern for investors is that the price has increased for four consecutive weeks and may be at risk of being overbought. In addition, the RSI indicates divergence for the latest impulse wave, indicating the trend may now lose momentum.
Regardless of technical analysis, most investor decisions will be determined by upcoming earnings. The world's largest network equipment maker, Cisco Systems, will release its quarterly earnings report today after the market closes. Economists expect the report to show revenue of $14.4 billion, up from $13.6 billion earlier, and earnings per share at $0.97, up from $0.88. Cisco is the 12th most influential stock within the NASDAQ. As mentioned yesterday, Investors will also have their eyes fixed on NVIDIA’s earnings scheduled for next Wednesday. NVIDIA has been a strong bullish price driver for the NASDAQ since October 2022’s earnings release.
A slight concern for investors is the hawkish comments from the Federal Reserve Committee. Higher interest rates can immensely pressure the stock market, not only the NASDAQ. Members of the Federal Open Market Committee have advised they are willing to keep increasing interest rates by a further 0.50% if inflation does not decline over the next three months. If inflation data, including the CPI, PPI, and PCE Price Index over the next month, do not point downwards, investors' concerns will grow and may pressure the NASDAQ. In addition to this, the US Retail Sales during yesterday’s US session read 0.4%, half of what investors were expecting. The news pressured the price, which is now directly related to consumer spending. However, the reading of 0.4% is significantly higher than in the previous two months.
Investors will continue to monitor earnings and the Fed Chairman’s speech on Friday. In addition, traders will monitor if the price breaks below $13,421 or above $13,497.
Summary:
- The US Dollar Index holds onto gains and continues to rise during this morning’s Asian Trading Session. The index is currently trading at 102.76 and is 0.19% higher than the daily open price.
- The NASDAQ continued its 4-week bullish trend and renewed its highs for 2023. The NASDAQ has increased more than 23% this year, more than any other US index.
- Investors are concerned that the price has increased for four weeks and may be at risk of being overbought. In addition, the RSI indicates “divergence” for the latest impulse wave, indicating the trend may now lose momentum.
- The world's largest network equipment maker, Cisco Systems, will release its quarterly earnings report today after the market closes.
- NVIDIA has been a strong bullish price driver for the NASDAQ since October 2022’s earnings release. The company is due to release its quarterly earnings report next Wednesday.
