NASDAQ price plummets on risk off sentiment, what’s next?

NASDAQ price news, and analysis

• The US stocks decline significantly, and investors flocked to the bond’s safety
• Reasons behind this move and how may this move continue
• NASDAQ price, key levels to watch

Global stock markets saw their worst day in years yesterday. The NASDAQ declined to a multi-month low at 17241 before rebounding on taking profit operations but still closed in the red with a 6% loss. Meanwhile, investors rushed to the safety of the US bonds causing the treasury yields to test their lowest levels since mid-2023.
Markets were spooked by the lower-than-expected NFP data 114k vs 175k and a spike of unemployment rates revealed in the job report 4.3% vs 4.1%. following this report the US10-year yield dropped to 3.66% while the US2 -year yield fell to 3.65% ending the yield curve inversion temporarily which is often seen as a clear sign for an impending economic recession, consequently the “fear gauge” surged to its highest levels since the Coronavirus pandemic, then fallen.

Obviously, investors are now watching for the Fed response to this development. The Fed hinted in its last meeting to starting its rate cut cycle on September with 25 basis points, citing fallen inflation rates nearing their 2% target. The ISM services PMI data for July came in better than expected yesterday, providing some room for the Fed to wait for mare data before making any move that could ease investors’ fears by cutting interest rates by 50 basis points instead of 25, although this probability remains low.

Next week, all eyes will be on the US CPI report of July. Any higher-than-expected data could trigger more risk off sentiment, scrapping the idea of a 50-basis point rate cut. Conversely, softer than expected data could negatively impact the US dollar as it would allow the FOMC to kick start and accelerate the rate cut cycle.

USNDX Price Daily Chart

Chart Source: ADSS Platform

This week, the USNDX opened with a downward gap and broke below the support level at the May 31 low of 18,185, retreating to its lowest level since early May before rebounding.

A daily close below 17,780 indicates a stronger bearish sentiment, opening the door for the price to potentially trade even lower toward the 17,000 mark. Conversely, a daily close above 18,382 suggests weakening bearish momentum, which could push the price back up to the 19,000 level. Notably, the Relative Strength Index (RSI) has dipped below the 30 level, indicating oversold conditions. If the RSI rises above 30, it could signal a potential price increase.