The NASDAQ index fell 1.38%, closing at 12,572. With a volatility of more than 3%, after the intervention of Jerome Powell, the markets went into negative.
Capital markets had a busy day yesterday, before and after the decisions of the monetary policies of the United States economy. Markets were mixed, and volatility was yesterday’s winner.
The Nasdaq Index is made up of more than 3,000 companies, many of which are in technology, but also includes companies from other sectors such as healthcare, consumer goods and energy. Some of the world’s largest companies are listed on the Nasdaq index, including Apple, Amazon, Microsoft, Facebook, and Alphabet (Google’s parent company). Most of the companies that comprise it closed the day in negative.
The FED Activates the 25 Points and the NASDAQ Falls Hard
All the movements in the markets are due to the fact that the Federal Reserve (Fed) raised the interest rate by 0.25%, and maintained its forecast of another increase this year, with the objective of cooling inflation and tightening credit conditions due to the reeling in the banking sector. The Federal Open Market Committee raised its benchmark rate to a range of 4.75% to 5%, the second straight quarter-point rate hike since the start of the year.
The Fed said it expects additional monetary policy tightening will be needed to achieve a tight enough monetary stance to bring inflation back to 2% over time. Inflation remains well above the 2% target, so the central bank insisted on the need for further tightening to bring monetary policy into tight territory. In addition, the FOMC revised upwards its inflation forecasts for this year and next.
The underlying Personal Consumption Expenditures Price Index, the Federal Reserve’s preferred inflation gauge, will come in at 3.6% in 2023, up from 3.5% previously forecast. By 2024, inflation is estimated to slow to 2.6%, versus the previous forecast of 2.5%. On the other hand, the Fed kept its benchmark rate forecasts unchanged from December, anticipating a terminal rate of 5.1% in 2023, and thus suggesting at least one more hike.
NASDAQ Index Technical Analysis
The Nasdaq index is at 12,633, fighting with the moving average of 20 periods in 4H. The NASDAQ sought the liquidity zone at 12,900, where it did not have enough strength to break and the bears took over, generating a bearish movement.
It should be remembered that the search for the 12,900 area was very likely, where the index achieved the 100% objective. The graph shows that NASDAQ formed a descending channel from that target of 12,900. From that resistance, it touches lows in a support zone of 11,670 and reacts upwards, breaking the upper trend line of the descending channel, thus achieving the objective of 12,900.
According to the data, it seems that the index is forming a double top, the 12,900 zone has not been absorbed, although it has already been visited 3 times, it still seems to be a solid resistance.
If the double top is viable, there would be a sharp drop in the NASDAQ index. The objective of the double top could be the area of 10,300, which would imply a fall of approximately 16%. This scenario must be taken into account, since it would touch the minimum of mid-October 2022.
By Audy Castaneda