NASDAQ 100 & ARKK OUTLOOK
- Nasdaq 100 builds on yesterday’s afternoon restoration and jumps 1.47%
- ARKK additionally levels a strong rally, however the near-term outlook for progress performs stays bearish
- Wednesday’s U.S. inflation knowledge could spark a pullback in threat property. This implies the current rebound could also be a “lifeless cat bounce”
After yesterday’s remarkable turnaround, the Nasdaq 100 prolonged its rebound on Tuesday as Fed Chairman Powell’s look in entrance of Congress introduced no new hawkish surprises, engaging dip patrons to scoop up among the hardest-hit tech shares this yr.
On the closing bell, the Nasdaq 100 surged 1.47% to 15,844 whereas the S&P 500 rose 0.92% to 4,713. In the meantime, the blue-chip Dow Jones underperformed the foremost fairness averages, rising 0.51% to 36,251. Elsewhere, essentially the most speculative corners of the market posted huge beneficial properties, with ARK Innovation (ARKK) up 2.75% on the day.
At his affirmation listening to earlier than the U.S. Senate Banking Committee, Powell indicated that the financial system now not wants extremely accommodative coverage, and that the Fed will use its instruments to “stop inflation from turning into entrenched”. These messages have been telegraphed repeatedly and effectively prematurely, in order that they didn’t spark a damaging response throughout the buying and selling session.
In his testimony, the central financial institution chief additionally acknowledged that it could take a while for rates of interest to return to ranges that prevailed earlier than the pandemic and that policymakers haven’t made any choices concerning steadiness sheet discount, underscoring that it could take 2 to Four conferences to achieve a dedication on trimming property.
The market appears to have taken consolation from the suggestion that the tightening cycle is not going to be as aggressive as many started to worry within the wake of the FOMC minutes, however traders could also be getting forward of themselves in attempting to front-run future coverage actions, in spite of everything, the elemental image hasn’t modified in a single day. That mentioned, sentiment may shift once more as soon as Wall Avenue digests the most recent inflation report.
Tomorrow morning, the U.S. Bureau of Labor Statistics will launch final month’s Client Value Index knowledge. Analysts count on December headline CPI to hurry as much as 7.0% y/y from 6.8% y/y in November, reaching its highest degree since early 1982. The core gauge can be seen accelerating, possible growing from 4.9% y/y to five.4% y/y, an indication that inflationary pressures are broadening within the financial system and aren’t pushed solely by a number of risky classes.
KEY EVENTS FOR WEDNESDAY
Supply: DailyFX Economic Calendar
A scorching CPI report will elevate wagers that the Federal Reserve will act shortly and forcefully to pullback assist with a purpose to curb hovering costs. Because of this, the market may start to cost in a fourth hike for 2022 with extra conviction and an earlier begin to the steadiness sheet runoff. These expectations will put upward stress on the Treasury curve, fueling volatility and weighing on costly rate-sensitive shares comparable to these within the know-how and progress area. Because of this the Nasdaq 100, however particularly the ARKK Innovation ETF (ARKK), stay biased decrease and that the restoration of the previous two periods could quantity to a “lifeless cat bounce.”
ARKK TECHNICAL ANALYSIS
ARKK has rebounded off key assist and is now heading in the direction of technical resistance within the 89/90 vary. If patrons handle to push the ETF above this barrier, the following upside goal seems close to the 100 psychological degree. On the flip facet, if promoting exercise begins to extend once more and the worth pivots decrease, assist is seen at 81.50/80.10. If bears breach this ground, ARKK may have few obstacles to retreat in the direction of the 74.00 space within the short-term.
ARKK TECHNICAL CHART
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—Written by Diego Colman, Contributor