Markets are catching their breath after Wednesday’s dramatic rebound, but Thursday’s early action suggests the euphoria was short-lived. At the time of writing in mid-day London trade, Nasdaq 100 futures were down nearly 2.5%, with similar performance observed across global indices. The renewed weakness came as investors wondered what the true impact of Trump’s tariff shuffle might be and figured it may be prudent to hit the pause button while the trade war between the US and China continues. That being said, dip-buyers will be lurking for opportunities after the big reversal yesterday, and we could still seem some decent bounce trades here and there while the market finds a new equilibrium price. The trend is still technically bearish given the lower highs, and for that reason, the bulls should not get complacent and still trade from level to level until more evidence of a market bottom emerges. Thus, the Nasdaq 100 forecast is yet to turn decidedly bullish.
So why are markets weakening again?
Yesterday sharp rally was driven mainly by relief. Yes, there is a pause on those reciprocal levies for 90 days, but the 10% universal rate is still there. What’s more, tariffs on Chinese imports are now at a staggering 125%. China, in turn, is weighing its next move, with top officials expected to meet Thursday to discuss fresh stimulus. For now, though, the US-China trade uncertainty is holding back excessive risk-taking, while it also remains unclear what sort of trade deals, if any, the US will strike with its other large trading partners, including the European Union. Speaking of the EU, it has just decided to put counter-tariffs on hold for 90 days. While the pause on both sides suggest trade deals could be struck, nothing is guaranteed and negotiations could take a long time, and any deals may have to get approval of the EU parliament etc., which adds further complexity to the situation. And then the is the trade feud between the US and China, which could drag on for a while.
It is also worth pointing out that the record-breaking rally midweek was more a function of poor liquidity and frantic short covering than actual buying. While dip-buying is something that could emerge in the days ahead, as indices test broken resistance levels, it is possible that traders may put more pressure on Trump by selling bonds again and lift yields to uncomfortable levels. So, don’t be surprised if traders quickly back off those risk-on moves.
The fact that oil (-3%) and the dollar are both sliding again shows worries about global growth — especially China’s — are gnawing away at demand expectations. Safe haven currencies like the Japanese yen and Swiss franc are catching a bid, which is not a great sign for risk.
Technical Nasdaq 100 forecast: Key levels to watch
Source: TradingView.com
The V-shaped rebound off a long-term support area (16300-16970) is always a great technical sign, but we need to see interim higher highs before giving the all-clear that the trend has turned bullish again.
Right now, the Nasdaq 100 has stopped right at resistance in the range between 19100 to 19400. This area was prior support and where the 21-day exponential average is coming into play. Above here, the next big resistance is seen around 19,900, followed by the underside of the broken trend line at 20,000, and then the 200-day average slightly higher at 20300.
A few support levels to watch include 18,560, marking today’s earlier low. Below this, 18,200 is the next key level to watch. Below that, the point of origin of yesterday’s breakout at 17465. The August 2024 low, now reclaimed, comes in at 17,235.
The bottom line is that the tariff narrative still remains too volatile for comfort, and markets are searching for equilibrium in a sea of uncertainty. Against this backdrop, market volatility is here to stay for a while, keeping the Nasdaq 100 forecast far from certain.
-- Written by Fawad Razaqzada, Market Analyst
Follow Fawad on Twitter @Trader_F_R
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