Nasdaq 100 Defies Tapering Fears, Nikkei 225 and ASX 200 Trade Higher

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NASDAQ 100, NIKKEI 225, ASX 200 INDEX OUTLOOK:

  • Dow Jones, S&P 500 and Nasdaq 100 closed +0.07%, +0.14%, and +0.16% respectively
  • Investors awaited Friday’s nonfarm payrolls data after a Fed official commented about tapering
  • The Nikkei 225 and ASX 200 indexes traded higher, setting a positive tone for Asia-Pacific markets

Fed Tapering, AMC Entertainment, Nonfarm Payroll, Asia-Pacific at Open:

Wall Street equity benchmarks registered small gains on Wednesday as investors digested tapering comments from a Fed official. Philadelphia Fed President Patrick Harker said it is appropriate “to slowly, carefully move back” on bond purchases at the appropriate time, echoing several other members who signaled a timeline is needed to start the tapering debate last month.

This is not something new, as rising inflationary pressures and the recent strong economic data suggested that conditions are probably maturing to warrant a slow scale back of the Fed’s asset purchasing program. Therefore, this Friday’s nonfarm payrolls data is critical. A much stronger-than-expected reading is likely to strengthen the tapering narrative and may exert downward pressure on equities, especially the rate-sensitive tech sector.

The so called “meme” stocks extended a rally on Wednesday, with AMC Entertainment pocketing an eye-watering 95% gain. GameStop rallied 13.3%. Excessive speculative activity has likely pulled the stock price too far from their intrinsic values, rendering them vulnerable to a sharp and rapid pullback when the tide recedes. Recent retailtrader frenzy is probably another indicator of an overheated market condition.

Crude oil prices rallied to a two-and-half year high, boosted by revitalized demand as the global economy recovers from the pandemic. Energy (+1.74%), real estate (+1.41%) and information technology (+0.62%) are among the outperforming sectors, whereas materials (-0.93%) and consumer discretionary (-0.40%) trailed behind.

Top 10 Stock by Market Cap in the Nasdaq 100 – Daily Performance

Source: Bloomberg, DailyFX

Asia-Pacific markets look set to open mostly higher on Thursday. Futures in Japan, Australia, Hong Kong, Taiwan, Singapore, Malaysia and India are in the green,whereas those in mainland China, South Korea and Thailand are in the red.

Japan’s Nikkei 225 index traded 0.69% higher, lifted by reopening optimism as the pace of the country’s vaccination drive picked up. As a result, cyclical-linked hospitality, materials and energy sectors may continue to outperform. Australia’s ASX 200 index hit an all-time high of 7,217 on Wednesday and extended higher on Thursday, buoyed by a stronger-than-expected GDP data and reflation optimism. The bullish momentum is likely to carry on.

Australian retail sales and trade balance data dominate the economic docket alongside a slew of Markit Service PMI data in the Eurozone. Later tonight, ADP employment change and initial jobless claims will be closely eyed by traders. Find out more from DailyFX economic calendar.

Nasdaq 100 IndexTechnical Analysis

The Nasdaq 100 index has formed a bearish Gartley 222 pattern and traded lower since (chart below). The “D” point coincides with the 200% Fibonacci extension level (14,013), therefore serving as a strong resistance. Prices have recently formed a “Double Bottom” pattern, which may be viewed as a bullish reversal indicator.

The MACD indicator is trending higher after forming a bullish crossover, suggesting that upward momentum may be building.

Nasdaq 100 IndexDaily Chart

Nasdaq 100 Defies Tapering Fears, Nikkei 225 and ASX 200 Trade Higher

Nikkei 225 Index Technical Analysis:

The Nikkei 225 index is attempting to breach the ceiling of the “Descending Channel” formed since early March. A successful try may open the door for further gains, whereas a failed one may result in another pullback. The ceiling coincide with the 100-day SMA line, and thus may serve as a strong resistance.

Further price weakness may lead to the formation of a “Death Cross” as the 20- and 50-day SMA lines are about to cross below the 100-day line. The MACD indicator is trending higher, suggesting that bullish momentum is dominating.

Nikkei 225 IndexDaily Chart

Nasdaq 100 Defies Tapering Fears, Nikkei 225 and ASX 200 Trade Higher

ASX 200 Index Technical Analysis:

The ASX 200 index breached above the 127.2% Fibonacci extension level (7,194) and extended higher, showing strong upward momentum. An immediate resistance level can be found at 7,340 – the 161.8% extension. The MACD indicator formed a bullish crossover and trended higher, underscoring upward momentum.

ASX 200 Index – Daily Chart

Nasdaq 100 Defies Tapering Fears, Nikkei 225 and ASX 200 Trade Higher

— Written by Margaret Yang, Strategist for DailyFX.com

To contact Margaret, use the Comments section below or @margaretyjy on Twitter

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