The Nasdaq 100 index is on track for its best month since 2020 as investors hope for a Fed pivot. It has also risen amid disappointing tech earnings from the United States. It rose to a high of $11,700, which was the highest point since September. Other indices like the Dow Jones, S&P 500, and Russell 2000 have also made a spectacular comeback.
Will the Fed pivot?
The main catalyst for the recent Nasdaq 100 rally is the likelihood of a Federal Reserve pivot after the recent data. Data published on Tuesday showed that consumer confidence dropped to 102 in October as inflation expectations rose.
Meanwhile, housing numbers have been disappointing lately. New, pending, and existing home sales have been relatively weak as interest rates and mortgage rates rose. Therefore, some analysts believe that the Federal Reserve will need to start pivoting soon.
A pivot could include a complete pause on interest rates or a gradual reduction on the size of rate hikes. Still, most analysts expect that the Fed will deliver another jumbo rate hike of 0.75% in November. The pivot will likely start in December.
The Nasdaq 100 index has also bounced back as the tech earnings season continues. Most of these results have been relatively disappointing. Alphabet published weak results as its advertising business struggled. Microsoft also published weak results due to a strong US dollar and mild tech earnings.
Meta Platforms also published weak results as its advertising business remained under pressure. Investors are also concerned about the firm’s pivot to the metaverse. Meta stock price crashed by more than 14% in the premarket.
The next key Nasdaq 100 constituents that will publish their results are Apple, Amazon, T-Mobile, Intel, and Shopify.
Nasdaq 100 forecast
The Nasdaq 100 index has been in a strong bearish trend in the past few months. It has crashed by about 30% year-to-date as the Fed delivered several rate hikes. On the four-hour chart, the index has managed to move above the important resistance level at $11,052, which was the lowest level on June 15.
The index has formed an inverted cup and handle pattern, which is usually a bearish sign. It also remains below the 50-day and 100-day moving averages. Therefore, there is a likelihood that the index will resume the bearish trend in the coming days. If this happens, the next key support level to watch will be at $10,455. A move above $12,200 will invalidate the bearish view.