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Asset Watch
Tuesday, August 20, 2024
The bull is back on Wall Street, as rate-cut optimism and resilient U.S. retail sales helped spur the NASDAQ 100 closer to its all-time highs. And with Fed Chairman Jerome Powell headlining the catalyst calendar this week, his annual Jackson Hole Economic Symposium speech could spur the next major move on Aug. 23.
What should you be watching?
Wedbush analysts told clients on Aug. 16 that an “AI tidal wave of spending is coming to the shores of the rest of the tech world” setting the stage for “tech stocks to move higher into year-end.” The group named beneficiaries like NVIDIA, Microsoft, Google, and Amazon, which have large weights in the NASDAQ 100.
Despite the technical carnage that occurred during the recent ‘flash crash,’ the NASDAQ 100’s comeback has been equally impressive. The index has turned major resistance levels into support, which may bode well in the weeks ahead.
For example, the NASDAQ 100 has recouped its 5, 10, 20, and 30-week moving averages, which are marked by the blue, yellow, brown, and red lines. In addition, the early 2024 highs (marked by the horizontal white line) provide additional support and align near the 30-week MA.
The NASDAQ 100’s 10, 20, and 30-week MAs are moving higher, which implies rising support. However, the 5-week MA is still trending lower, and since the surge only took one week, they could end up being false breakouts if Powell’s speech spoils the party.
With the NASDAQ 100 increasingly jumpy, the right trade approach depends on your risk tolerance. But, after closing above all of these critical weekly MAs, they should provide support and fuel the next leg higher.
To manage risk, you could wait for a successful retest of the 10 or 5-week MAs and enter if strength emerges. Either way, last week’s rally erased a lot of technical damage, and it will likely take some terrible news to break below all of these support levels.
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