Nasdaq talking points:

  • The tech-heavy index is down by more than 30% from the high set last November.
  • Q2 has been especially painful with the Nasdaq currently down more than 20% in the quarter. Tomorrow brings quarter-end but there’s no sign yet of the Fed letting up as inflation remains well-above their 2% target. This could spell continued pain for stocks as we move into the second-half of 2022.
  • We’ve been discussing these themes at DailyFX throughout 2022 and a host of analysts have taken bearish stances onUS equities as ‘Top Trades’. To get the full Top Trades installment, the link below will allow for access.

It’s been a rough Q2 for the Nasdaq, with the index currently down by more than 20% from the April open. The backdrop for that setup coming into Q2 is notable, however, as it appears that we have a similar theme playing out here with a late-quarter rally that’s likely driven at least in part by profit-taking.

The Nasdaq jumped by 17.97% in the last two weeks of March, with the pivot from bear to bull taking place around the March FOMC rate decision. In June, we’ve seen the Nasdaq run as high as 10.78% higher from the prior low and, again, this was around an FOMC rate decision.

This helped prices in the index to recover up to a key zone of resistance as taken from prior support. This spans from 12,207 up to 12,408 and this area was in-play as resistance-turned-support in late-2020 and early-2021. This zone is shown in purple on the below chart.

Nasdaq 100 Weekly Price Chart

Nasdaq weekly chart

Chart prepared by James Stanley; Nasdaq 100 on Tradingview

On a shorter-term basis, a key level remains in-play at 11,700. This is the 50% marker of the pandemic move, spanning from the 2020 low up to the high set last November. That level came in as support for about two weeks in May, just before a 12.65% rally pushed up to lower-high resistance. This level also came into play as resistance last week before bulls forced the breakout up to 12,207.

But, now that prior support is back in as resistance, can sellers continue to push? Or will the bearish theme need to wait for the Q3 open.

One thing is clear and perhaps even more so after this morning, the Fed appears to have little concern about falling prices in markets as they are clearly stating that the primary focus of policy is tempering inflation, which hasn’t yet shown in the data.

Nasdaq 100 Daily Price Chart

Nasdaq daily chart

Chart prepared by James Stanley; Nasdaq 100 on Tradingview

Nasdaq Shorter-Term

At this point with a little over a day remaining in Q2 trade, the Nasdaq is showing resistance at prior support. This keeps the door open for breakdown potential but the end of the quarter aspect could make matters a bit messier, similar to what showed at the end of Q1.

But, that Q1 bounce began to dissipate just ahead of the Q2 open and perhaps a similar type of theme may show here.

From a technical perspective, we have continued resistance at the underside of 11,700 which is now confluent with a prior bullish trendline. This keeps the door open for bearish scenarios and that could become considerably more attractive on a breach of this morning’s low at 11,565.

Nasdaq Two-Hour Price Chart

Nasdaq two hour chart

Chart prepared by James Stanley; Nasdaq 100 on Tradingview

— Written by James Stanley, Senior Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

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