The cooler-than-expected CPI data sent broad markets higher on Wednesday. Wall Street continued the recent rally as the data confirms a “Fed pivot” no matter if it is a 75 basis point or a 50 basis point, which all marks a slowdown in rate hikes. A bear-mark rally usually happens during the peak in a rate hike cycle and the real crash often occurs halfway through the rate cut cycle as seen in the below chart.
Source: TradingView (Click to enlarge the chart)
Based on the above conclusion, the US equities are still on a course of a “Fed pivot” relief rally. Nasdaq rebounded nearly 21% since the year-low seen in mid-June, now the index is about 18% down year to date. The rebounding tailwind could take the tech-heavy index to rise by another 10-12% toward 15,000 if the Fed is in line with the market’s expectations.
Nasdaq, daily (1-2months)Source: CMC Markets NG (Click to enlarge the chart)
Nasdaq had a major bullish break out on the descending trendline yesterday. The upside momentum may take the index to rise toward the resistance around Fib. 50% retracement, near 14,000, confluence with the 200-day MA. However, the overbought indication in the RSI may soon cause a retreat and test the potential near-term support of around 13,000.
On the flip side, a breakdown of the support at 13,000 may reverse the rebound trend and take the index re-test further support at 12,360.