The Nasdaq 100 index made a strong rebound on Friday, as investors opted to place bets on the lower-than-expected employment change signaling a no-action stance by the Fed on their current position.
Several officials of the US Federal Reserve have repeatedly said that the apex bank would only start to taper the QE program or consider an earlier rate tightening cycle if the jobs and inflation data support such a move.
While things have been moving in that direction for inflation data, the same cannot be said of jobs, which only grew by 559K in the public sector (minus agriculture) in May versus the consensus of 645K.
A Friday afternoon interview on CNBC by Cleveland Fed President Loretta Mester bolsters the Fed’s position once more. Mester said the Fed would “like to see further progress”, and that the “Fed wants to be deliberately patient with monetary policy.”
Patience is the trigger word that swung the mood on the Nasdaq 100 to the upside in response to the jobs data.
The Nasdaq 100 index has come to be a barometer of the Fed’s lower for longer near-zero rates policy and can conveniently be traded for economic fundamentals that support early tapering/rate hikes (Nasdaq-negative) or a delayed tapering/rate hike cycle (Nasdaq-positive).
With the faltering of jobs recovery as shown in the May NFP data, the Fed’s position is reinforced once more, leading to the rebound seen in the Nasdaq 100 index on Friday.
The Nasdaq 100 currently trades 1.68% higher.
Technical Outlook for Nasdaq 100
The recovery move is now challenging resistance at the 13761 resistance level, which has held firm for close to 4 weeks.
A break above this level allows the pair to target the 13904 resistance. If 13904 is uncapped, 14078 comes into the picture as an additional target to the upside. Only a break of this level restores the uptrend on the Nasdaq 100, as this move would create a new all-time high.
Conversely, rejection at 13761 gives room for a potential pullback. This move would enable the 13559 to come under scrutiny from the bears. If this support fails to withstand bearish scrutiny, 13400 and 13344 become additional targets to the south, as do 13135 and 12973.