Asset Watch
Tuesday, January 14, 2025
While macroeconomic data has been the primary source of stock market volatility in 2025, the bottom-up fundamentals may take center stage in the days ahead. With earnings season beginning on Jan. 15, Wall Street titans like JPMorgan, Goldman Sachs, and Citigroup kick off the festivities.
Consequently, resilient results could help the S&P 500 and NASDAQ 100 regain their mojo.
The ‘good news is bad news’ trade was on full display on Jan. 10, as a robust U.S. nonfarm payrolls report pushed the U.S. 30-Year Treasury yield above 5%. In response, the hawkish re-pricing in the bond market sunk stocks, with the NASDAQ 100 suffering mightily.
The unrelenting rise in rates has made equities less attractive, as higher yields on risk-free assets like Treasury bonds make risky assets like stocks seem unappealing. However, if rates calm and solid earnings rekindle confidence, a furious comeback could unfold.
While the recent pullback has dampened enthusiasm, the weekly chart shows how long-term support levels may soon mark a bottom.
For example, the horizontal white line highlights how meaningful support from the July 2024 highs is near 20,700. In fact, the low for the NASDAQ 100 on Jan. 10 was less than 30 points above the key level.
On top of price support, the 20 and 30-week moving averages have been staunch support and resistance zones for years. If you analyse the blue and yellow lines, you can see they acted as support during the 2020/2021 bull market before flipping to resistance during the 2022 bear market.
Therefore, with both metrics still support and sitting relatively close to the horizontal white line on the right side of the chart, it will likely take a major risk-off event to break below all three levels.
With the NASDAQ 100 down by roughly 6% from its all-time high, corrections of 10% or more are fairly common during bull markets. But, with three key support levels near, the risk-reward seems attractive at these levels.
As such, aggressive traders may want to build a position immediately, while cautious traders may prefer to wait until the index confirms support by holding and rallying off the 20,700 area.