The Nasdaq 100 continued its ascent for the 3rd straight session as investors ignored the dismal ADP jobs data. The ADP Employment change recorded a colossal loss of private-sector jobs in April 2020, representing a decline not seen in decades. However, continued upbeat sentiment on the US markets meant that the Nasdaq 100 Composite Index is up 1.26% as technology stocks lead the march beyond the critical resistance at 8945.7.
So why are investors on the Nasdaq 100 seemingly unbothered about the jobs data?
One reason is that the total number of initial jobless claims in April is not too far off from the ADP’s actual employment change figure, and also not far from the market consensus. In other words, markets may already have expected what was coming and had priced it all in.
A second reason is that the reopening of economies around the world and also in the individual states that make up the US could cause manufacturing and services activities to pick up in the coming weeks, which would potentially reverse the employment situation. Therefore, investors may be confident that the dismal jobs numbers may not last too long.
Earnings reports of several Nasdaq 100 listed companies have either been better than expected or have not been as bad as analysts had feared. These factors are driving the Nasdaq 100, with the tech index leading the charge with a 1.2% gain. The biotech sector is also not doing badly, as many pharmaceutical companies are either researching vaccine candidates for the coronavirus or are seeking outright cures.
Today’s daily candle has taken the Nasdaq 100 beyond the 8945.7 resistance level, and the candle is now marching towards 9092.3. However, the confirmatory filters for a break of 8945.7 are not in place, so we can only speak of a violation of that level and not a breakout. Two successive daily candle penetrations above 8945.7 confirm the break of that level and make 9092.3 and possibly 9167.4 and 9264.4 as immediate targets. The latter would be the 141.8% extension of the initial wave XA on the harmonic pattern on the chart. Will the price reverse at that level to confirm the pattern or will it advance beyond that and invalidate the pattern? This remains to be seen.
On the flip side, failure to confirm a break of 8945.7 could lead to price retreat which tests 8691.0 along the way as a pitstop, with the possibility of hitting the lower border of the previously identified range at 8442.5 remaining a possibility. We also have a chance of completion and validation of the harmonic pattern, which could usher in a reversal at 9264.4, targeting key price levels at 9167.4, 9092.3, 8945.7, 8691.0 and 8442.5, in that order. A breakdown of the 8442.5 support brings 8160.2 and 8015.5 into focus, with a possible downside target at 7834.6.