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Nasdaq 100 enters bull market!

We now have the answer to the question we posed this time last week (“Can Nasdaq 100 return to bull market?”).

The tech-heavy index has indeed climbed 20.3% since the closing price on 28th December 2022, which was then a two-year low, meeting the criteria of a 20% climb from a recent low to mark a “bull market”.

NQ100 enters bull market

The Nasdaq 100’s year-to-date gains are also nearing 14%, much higher than other major US benchmark indices:

  • S&P 500 (SPX500_m) has advanced by 4.9% so far this year.
  • The Dow Jones index (Wst30_m) is still down by 1.3% since the start of 2023, having been dragged lower recently by the bout of US banking turmoil.


Why is the Nasdaq 100 climbing?

Markets now believe that the US Federal Reserve (a.k.a. the Fed) is almost done with its rate hikes.

Recall how tech stocks have been highly sensitive to Fed rate hikes that have been ongoing for the past 12 months.

  • Loans become more expensive to service as interest rates move higher, which suggests that these tech companies are less inclined to borrow more money.
  • With more money needed to service these “more expensive” borrowings, that’s less funds that the company has to grow its business and earnings.
  • Investors are aware of the potential hit to earnings further down the line, hence had been selling out of tech stocks since last year.


However, the above narrative has changed this year, as markets price in a policy pivot by the US central bank.

At the time of writing, markets are forecasting an 89% chance that the Fed will CUT interest in September this year.

That’s in stark contrast to the thought of interest rates will move even higher this year in order for the Fed to quell stubbornly-elevated US inflation.


What’s next for the Nasdaq 100?

Speaking of inflation, the Fed’s preferred measure of inflation, the PCE Core Deflator is due to be released tomorrow (Friday, March 31st).

For the February data, this inflation measure is expected to have risen by 4.7% compared to February 2022.

This would match January’s year-on-year figure, lending credence to the idea that US inflation remains “sticky”, despite the 450 basis points in hikes that the Fed has already triggered since March 2022.

  • If the PCE Core Deflator comes in below the market-expected 4.7%, suggesting that inflation is slowing down, that suggests that the Fed can indeed ease up on its rate hikes regime.
    Such a though may further boost the Nasdaq 100.
  • However, if the core PCE exceeds market expectations, that may reinvigorate fears over a hawkish Fed.
    If market bets for further rate hikes are revived, that may prompt the Nasdaq 100 to pare recent gains.


From a technical perspective …

The NQ100_m on the daily chart is now testing a key resistance area – the 38.2% Fibonacci level from its plummet between the November 2021 record high down to the October 2022 trough.

A sustained breach of the psychologically-important 13,000 mark may pave the way for the next resistance level derived from the August 2022 cycle peak at 13,206.3.

However, if this index relinquishes recent gains in light of hotter-than-expected inflation, the recent cycle low at 12,523.2 may offer immediate support.



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