- Dip buyers are returning, buoyed by positive tech sector momentum.
- Key support and resistance levels will be crucial as the US election approaches.
- Maintaining vigilance around pivotal price points will help navigate the Nasdaq 100’s bullish trend amid looming risks.
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After Tuesday's drop, the markets stabilized on Wednesday in a quiet trade and now US equity futures are making a comeback attempt during the first half of Thursday’s session. This is despite continued weakness in China, where the government’s latest attempt to shore up the property market, failed to lift sentiment.
The recovery has been driven by the tech sector after results from Taiwan Semiconductor Manufacturing (NYSE:TSM) helped to soothe investor sentiment hurt by a profit warning from Dutch chip equipment maker ASML (AS:ASML) on Tuesday, something which hit US chipmakers across the board.
There were also reports of the US limiting advanced AI chip sales from companies like Nvidia (NASDAQ:NVDA), which had also sparked some concern. But judging by the price action in the futures market, it looks like dip buyers have once again swooped in as they have done all year. Betting against the market has been costly in 2024, with almost every dip being quickly bought up. But with the US election just three weeks away, it could be a bumpy ride from here.
For now, stock market investors are happy that central banks globally have been easing interest rates, with the European Central Bank set to cut by another 25 basis points today. While some of this has likely been priced in, the US presidential election looms large, and tight polls may drive some investors to take profits ahead of such a big risk event.
Nasdaq 100 Technical Analysis and Trade Ideas
From a technical perspective, the Nasdaq 100 is still looking bullish and regardless of what we think might happen from a macro point of view, you have got to respect the charts and the trend. Until such a time there is a clear bearish reversal pattern on the chart, there is little point in trying to bet against the market. I will set out the scenario that could play out for the bears, though. As traders, we have to be prepared for anything that could happen.
If you take a glance at the daily chart, you’ll notice the index has been consistently making higher highs and higher lows since it bottomed out in early August, following the unwind of the yen-funded carry trade. Since then, the Nasdaq has reclaimed the 21-day exponential moving average and broken through a few key resistance levels, which have now flipped to support. All signs point to the path of least resistance being to the upside—for now, anyway.
Key Levels to Watch
The bulls’ first line of defence sits around 20,285. The next key support is around the 19,900-20,025 area (shaded in green), which acted as support in the first week of October. At the moment, the bulls are targeting the next resistance zone between 20,465 and 20,685 (shaded in grey). This area was the point of origin of the breakdown back in July, and has now offered strong resistance on at least two occasions. This area now needs to break if we are to see a run towards the July peak of 20,759 in the coming days.
However, as mentioned, we know that anything can happen at any moment. It's crucial, therefore, to keep an eye on the charts for signs of a reversal. A break of key support levels could signal an opportunity to step aside or even go short if the trend shifts.
When to Get Bearish
If the market reverses today for whatever reason and turns lower, then that could be the first sign of trouble, particularly after Tuesday’s bearish close. This would imply the bulls, who bought the dip on Wednesday, are now getting stuck.
But for me, a clearer sign of a reversal would be if that 19,900-20,025 gives way in the coming days, for then we will have formed our first lower low since the markets bottomed in August. A breakdown here could open the door for a deeper correction, possibly sending the index down toward the 200-day moving average.
But let’s not jump the gun. For now, it’s all about watching those key support levels and seeing if the bulls can keep control of the market. If they do, the uptrend remains intact. If not, we now know exactly what to look for.
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Final thoughts
While the Nasdaq 100 has had an impressive run, caution is key as we head toward the US election. The bulls are still in control, but a sharp reversal is always possible. Keep an eye on key support levels, manage your risk, and be prepared for a shift in trend. For now, we remain cautiously optimistic, but in trading, anything can happen.
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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.