Nasdaq Technical Analysis – Just a pullback or the start of a bigger correction?

Fundamental Overview

The Nasdaq rallied into a
new all-time high following Trump’s victory and the red sweep as the market
started to look forward to bullish drivers like tax cuts and deregulation.

The only bearish reason
people were looking at was the rise in Treasury yields. That’s generally
bearish only when the Fed is tightening policy not when yields rise on positive
growth expectations.

Right now, the Fed’s
reaction function is that a strong economy would warrant an earlier pause in
the easing cycle and not a tightening. That should still be supportive for the
stock market.

If the Fed’s reaction
function changes to a potential tightening, then that will likely trigger a big
correction in the stock market on expected economic slowdown.

For now, the current
pullback looks as something healthy given the very strong rally following
Trump’s victory, so the dip-buyers should be happy about it.

Nasdaq
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that the Nasdaq pulled back to a key swing high level at 20790. This is
where we can expect the buyers to step in with a defined risk below the level
to position for a rally into a new all-time high. The sellers, on the other
hand, will want to see the price breaking lower to increase the bearish bets
into the major trendline.

Nasdaq Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have also the 38.2% Fibonacci retracement level standing right around the
swing high level. This should technically strengthen the support level and give
the buyers a nice level where to lean onto and protect their stops. The
sellers, on the other hand, will look for a break lower to extend the pullback
into the trendline.

Nasdaq Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have a minor downward trendline defining the current pullback. The
sellers will likely keep on leaning on it to position for new lows, while the
buyers will look for a break higher to increase the bullish bets into a new
all-time high. The red lines define the average daily range for today.

Upcoming Catalysts

Today we conclude the week with the US Retail Sales report.