The RBA governor Phillip Lowe also offered a relief rally in the ASX by staying the plan for a rate hike between 25-50 bps in the July meeting, while President Joe Biden reassures that a US recession is avoidable. Since the central banks have most likely hit the peak of hawkishness, the equity market bulls may get a reprieve from the recession fear-led selloff this week after the US Fed settled a 75-bps rate hike, though the rebound might be short-lived. In addition, the tech-heavy index, Nasdaq, outperformed both the S&P 500 and Dow in the last few sessions, suggesting the growth stocks may take a lead in the rebounding phase in the US stocks if this trend persists for the rest of the month.
US NDAQ 100-Cash, Daily, CMC Markets NG (Valid for 1-2 weeks)
(Click to see the enlarged chart)
In the daily chart, a bullish divergence between Stochastic and the market price surfaces, with Stochastic reversing the downtrend from the oversold territory while the market price is in the downtrend. We may see this near-term bottoming opportunity persists throughout the rest of the month, but potentially waiting for another leg down to retest the recent low at 11,000. The imminent resistance will be at 11,756, which is high on the 16 May, then 12, 000 (Fib1. 23.60%, 20-day MA). A further optimism may take the index to hit the resistance at the 50-day MA of 12,500 but this requires additional fundamental factors to boost the rally.
At the same time, it is very important to keep in mind that the index’s downtrend is still intact and the macro backdrop does not support a long-term bottom reversal. Therefore, any rebounding in the markets could be short-lived. If Nasdaq breaks down the support of 11,000, the index could be heading to 10,470, further support at Fib2. 61.80%.
Fib1 – The Fibonacci retracement that connects from the low of March 2020 to the high of November 2021.
Fib2- The Fibonacci retracement that connects from the high of April 2022 to the low of June 2022.