After the Jackson Hole event, Nasdaq has been attempting to recover from the recent selling pressure. Since the middle of July, the index has dropped by more than 6%. The latest positive bar from yesterday appeared weak, displaying lower-than-average volume. This suggests that the upward reaction may lack the necessary strength to surpass the 50-day moving average.
The low volume might possibly be attributed to the busy data scheduled for the remainder of the week. The data deluge will commence with housing prices and JOLTS data today. Throughout the week, GDP, ISM Manufacturing, PCE, ADP, and the jobs report could induce above-average volatility. Traders will be receiving information about inflation, the job market, and manufacturing activity all at once.
This week’s data has the potential to trigger either a new upward movement or a selloff, as traders assess the data’s implications. The ongoing uptrend from late 2022 remains intact, and there is still room below to the lower trend channel line. The 50-day and 100-day moving averages could play a pivotal role this week.
Upon reviewing the data, positive GDP and ISM data could positively affect the index due to an increased likelihood of a soft landing. A lower-than-expected PCE figure would certainly benefit the index, but the jobs data might pose a challenge. Nonfarm data that is excessively low or high could respectively have negative consequences, as it would decrease the likelihood of a soft landing if it came out too low or increase the chances of another rate hike if it came out too high.
Examining certain indicators, the present period of stagnation bears resemblance to the flat zone observed in January in various aspects. Previously, the RSI surged subsequent to closing near 30. Following this, the MACD intersected its signal line, and eventually, the RMI (relative momentum index) issued a buy signal, catalyzing the onset of an uptrend. At present, the flat zone is slightly higher than the trend line relative to before and above the 100-day average. RSI rebounded from near 30 (although 50 is working like a resistance for now), and the MACD is on the verge of generating a buy signal. A positive conclusion to the week has the potential to significantly increase upward pressure.
Conversely, contingent upon the data, there exists the possibility of targeting and testing the lower boundary of the channel.
