QSince our last report, the NASDAQ 100 has moved higher and formed a new all time high figure, yet the Dow Jones 30 and S&P500 appear to have moved lower. At this point we would like to note our concerns, in regards to the recent direction taken by the Dow Jones 30, and its divergence with the S&P 500’s and Nasdaq 100’s price direction, which could be an early sign of a trend reversal. In today’s report, we would like to address what seems to be fundamentally driving them, and then narrow our focus on the US Core PCE rates, the lobbying efforts by Amazon, Apple and Google in addition to the implications of Nvidia’s recent earnings report. We conclude our report with a technical analysis of Nasdaq’s daily chart.
US Core PCE rates are due out on Friday
Since last week, the FOMC’s last meeting minutes, tended to highlight a predisposition by policymakers to maintain interest rates higher for longer. In particular, policymakers highlight that “Domestic data releases over the intermeeting period pointed to inflation being more persistent than previously expected implying that the Fed may keep rates higher for longer in order to ensure inflation returns to the bank’s 2% inflation target.
The implications of maintaining interest rates higher for longer, could weigh on US Equities. However, the real test for the US Equities markets, may be the release of the US Core PCE rates for April on Friday, which are the Fed’s favorite tool for measuring inflationary pressures. Should the rates imply a persistent or even an acceleration of inflation in the US economy, it could increase pressure on Fed policymakers to maintain current interest rate levels for a greater period of time than what is currently expected by market participants. Such a scenario may support the dollar, whilst weighing on US Equities and vice versa.
Google (#GOOG), Amazon (#AMZN) and Apple (#AAPL) oppose India’s antitrust proposal
According to a report by Reuters, a US lobby group representing Google (#GOOG), Amazon (#AMZN), and Apple (#AAPL) has asked India to rethink its proposed competition law, which has been described as similar to that of the EU’s Digital Markets act of 2022. The US lobby group according to the same article, argues that regulations against data use and preferential treatment of partners could raise user’s costs . Furthermore, India’s Digital Competition Bill wil apply to big firms, including those with a global turnover of $30 billion and whose digital services have at least 10 million local users. The proposed bill could inadvertently reduce the potential revenue from the Indian consumer market for the aforementioned firms. Thus, with a population of over 1.4 billion, the Indian consumer market could be considered extremely valuable and lucrative for the aforementioned companies. Hence, should their potential future revenue from such a significant market be “threatened”, it could weigh on their respective stock prices.
NVIDIA beats earning expectations once again
The expectations were for Nvidia’s earnings per share figure to improve to 5.58 from 5.16, in addition to the company’s revenue increasing to 24.53B from 22.1B. However, the company once again beat market expectations, with Nvidia posting an earnings per share figure at $6.12 per share in addition to their revenue increasing to $26.04 billion. The better-than-expected earnings release appears to have propelled Nvidia’s stock price to new all-time highs. Given the importance placed by analysts on Nvidia’s earnings report, the better-than-expected earnings may have also improved the market sentiment surrounding the US Equities markets and in particular the Nasdaq 100.
Technical Analysis
#US100 Daily Chart
• Support: 18500 (S1), 17800 (S2), 17000 (S3)
• Resistance: 19100 (R1), 19700 (R2), 20300 (R3)
US100 appears to be moving in an upwards direction, with the index having broken above our resistance line now turned to support at the 18500 (S1) level. We maintain a bullish outlook for the index and supporting our case is the Bollinger bands which appear to be tilted to the upside, implying a bullish market sentiment, in addition to the RSI indicator below our chart which currently registers a figure near 60, implying a bullish market sentiment as well. Furthermore, we would also like to note the upwards moving trendline which was incepted on the 19th of April, which continues to be validated. For our bullish outlook to continue, we would require clear break above the next possible resistance level at the 19100 (R1) figure, with the next possible target for the bulls being the 19700 (R2) resistance level. On the flip side for a bearish outlook we would require a clear break below our 18500 (S1) support level, with the next possible target for the bears being the 17800 (S2) support line. Lastly, for a sideways bias we would require the index to remain confined between the possible sideways-moving channel being formed by the 18500 (S1) support level and the 19100 (R1) resistance line.
