Trump diagnosed with chronic venous insufficiency, remains healthy
- Stocks are near record highs but need fresh catalysts to sustain the rally.
- Recent gains were driven by policy moves, but momentum may be stalling.
- August 1 tariff deadline poses a risk to the current bullish momentum.
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The US major indices remain near record highs, but you feel some fresh catalyst is now needed to justify continued buying at these lofty levels. The bullish run began back in April and it’s been a steady climb, with several tailwinds lifting sentiment along the way — from President Donald Trump’s decision to delay reciprocal tariffs deadline, a welcome calming of tensions in the Middle East, to the US approving the “big, beautiful bill” of tax and spending policies that form the core of Trump’s second-term agenda.
Ongoing optimism around artificial intelligence continues in the background, which has helped to lift shares of Nvidia (NASDAQ:NVDA) to record levels while other chipmakers and AI stocks have also benefitted. Shares in Taiwan Semiconductor Manufacturing (NYSE:TSM) surged after Q2 results, and that helped to give futures a lift. But will we see new highs, and will the rally continue for major indices, given growing concerns about inflation amid threats of significantly higher tariffs from August?
Before discussing those macro factors, let’s first take a look at the chart of the Nasdaq to highlight some key levels to watch.
Nasdaq 100 Technical Analysis And Trade Ideas
From a technical point of view, the Nasdaq 100 remains one of the strongest indices out there. The index has been hitting repeated all-time highs with minimal pullbacks, ever since it took out December’s old peak towards the end of June. Though there is now the risk of a pullback because of macro concerns, the bears will need to see a clear reversal pattern before potentially looking for bearish trades. Until that happens, dip-buying remains the name of the game.
Short-term support on the Nasdaq 100 futures comes in around 23,000 now, a level which has acted as both support and resistance on an intraday basis. Blow that, the trend line comes in at 22,700, where we also have the 21-day exponential average converging. But should the index head further lower, then the December peak of 22,425 will be in focus next, followed by the last resistance prior to the latest breakout at 22,093.
On the upside, the 23,100 is an interesting level to watch given the index’s failure to hold the breakout above this level on Tuesday, when it formed a small doji candle after running into offers at new highs. The high of that day’s range comes in at 23,222, which is also the current all-time high.
Markets in Need Of Fresh Catalysts
With uncertainty over the US trade policy lingering, the US markets are in need of a fresh catalyst for the next leg up, you’d feel. Consequently, don’t be surprised if we now see a bit of consolidation or a retracement after both the S&P 500 and Nasdaq 100 hit new highs recently. In Europe, the likes of the German DAX and the UK’s FTSE 100 also hit new records, but they too have lost a bit of momentum.
Clearly, sentiment is still bullish towards global stocks, but it will become increasingly difficult for the bulls to justify continued buying without any fresh catalysts – especially on Wall Street. Perhaps the upcoming earnings season could be the catalyst, before the focus turns to the August 1 tariff deadline again.
When Will the Fed Cut Rates?
Fed Chair Jerome Powell was about to be fired yesterday, and markets panicked – before Trump denied those reports. The market’s reaction goes to show that by getting rid of Powell, Trump will undermine the Fed’s credibility. So, the Fed has to flip the script and cut rates when the economy warrants it, not because of pressure from Trump.
The FOMC fears the higher US tariffs will show up in US inflation in the months ahead, making it risky to cut rates now as that could exacerbate price pressures. Still, the market is expecting the Fed to restart the easing cycle soon. But the probability for a September 25 basis point cut fell following the mixed inflation report this week and the monthly jobs report last week, which was too strong to challenge the Fed’s current trajectory.
In response, the dollar has resumed higher. Will equity markets now ease off?
Trade Tensions Lurking In The Wings
Meanwhile, the real test will be August 1, with Trump saying there will no longer be no further delays. Thus far, progress has been underwhelming. And if history’s any guide, Trump won’t hesitate to reach for the tariff lever once more. That could prove a thorn in the side of this bull market, casting a shadow over what has been — thus far — a rather smooth run for US equities since markets bottomed in April.
The closer we get to the August 1 deadline without any deals, the more likely the chances of tariff hikes there will be.
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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, counsel or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple perspectives and is highly risky and therefore, any investment decision and the associated risk remains with the investor.