The current market sentiment seems to be concentrated more on growth-related macroeconomic data rather than concerns about inflation risk. This change in focus can be attributed to fears of a potential US recession or hard-landing scenario. The recent soft US retail sales data has only added to these concerns, sparking apprehension among investors.
The Nasdaq 100, which was the worst-performing benchmark US stock index in July, recorded a monthly loss of -1.6%. This underperformance can be partly attributed to the heavy weightage of US mega-cap technology stocks in the index. The global synchronized risk-off behavior in the past few weeks led to a significant drawdown in the Nasdaq 100, with a decline of -16% from its July high to the August low.
One of the key indicators to watch is the VVIX / VIX ratio, which has been on the rise. This increase in the ratio suggests a lingering uncertainty in the US stock market. A potential spike in the VIX cannot be ruled out, given the current volatility levels. The implied volatility of the S&P 500, as measured by the VIX, has seen a decline from its 52-week high, indicating a return of risk appetite. However, the VVIX / VIX ratio paints a different picture, hinting at possible turbulence ahead.
Technical Analysis of the Nasdaq 100
From a technical analysis perspective, the Nasdaq 100 CFD is showing signs of exhaustion in its minor uptrend phase. The hourly RSI momentum indicator has displayed a bearish divergence, suggesting a potential correction in the near term. The key resistance level to watch is at 19,230, which will determine the direction of the Nasdaq 100 CFD. Failure to surpass this resistance could lead to a corrective decline towards intermediate support levels at 18,680 and 18,435/310. On the other hand, a breakout above 19,230 would invalidate the bearish scenario and pave the way for further upside towards intermediate resistance levels at 19,600 and 19,900.
The Nasdaq 100 faces several challenges in the current market environment. The shift in focus towards growth-related data, coupled with concerns about volatility and technical indicators, suggests a murky outlook for the index. Investors should closely monitor key levels and indicators to navigate the uncertainties in the market effectively.