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tech peaks with the rebound in long rates

Key points from the article on the Nasdaq 100:

  • The resurgence of Sino-American tension and the rise in long-term rates put pressure on Wall Street
  • The Nasdaq 100 could fall below its resistance at 13,000 points

The resurgence of Sino-American tension and the rise in long-term rates put pressure on Wall Street

Wall Street ended in the red yesterday against a backdrop of renewed risk aversion and a rebound in long bond yields. The S&P 500 ended down 0.7% and the Nasdaq 100 0.3% as sentiment was weighed down by renewed tension between the United States and China.

Relations between the two superpowers seem to have never been so bad following the visit of the Speaker of the House of Representatives, Nancy Pelosi, to Taiwan, including Beijing cconsider as a of its provinces. In retaliation, China announced military exercises near the island from August 4 to 6, the suspension of imports of more than 2,000 foodstuffs and sand exports and may soon announce retaliation against Washington.

Regarding the bond market, yields rose after comments from some Fed governors suggesting that monetary tightening is still far from over. The Presidente of the San Francisco Fed, Mary Daly, said that « our work is far from done » in inflation while PresidentChicago Fed Charles Evans, hinted that another sharp 75 basis point rate hike may still be on the table for the September meeting.

2- and 10-year yields rose 17 basis points on the comments, naturally putting pressure on broader equity markets. The eleven sectors of the S&P 500 ended in the red and could continue to be under pressure in the coming days given the presence of the indices under major resistance. Indeed, the S&P 500, Nasdaq and Russell 2000 are back below their early June highs thanks to a more than 10% rebound from their June lows.

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Market traders should take advantage of these resistances to lock in some short-term profits, but markets could continue to rally higher in August as sentiment continues to normalize. Indeed, the bearish sentiment still seems too present on the markets with a high Put/Call ratio and a very low recovery of short positions on futures contracts.

The long-term outlook, however, remains bearish as the economic outlook is expected to continue to darken and monetary policies may tighten further than investors expect.

The Nasdaq 100 could fall below its resistance at 13,000 points

Chart daily price of the Nasdaq 100 realized on TradingView:

From a technical analysis perspective, the Nasdaq 100 could pull back below its resistance at 13,000 points in the short term and return to test its 20-day moving average, currently at around 12,265 points before possibly continuing its rebound up to its 200-session moving average or to resume its underlying downward trend.

Note that a pullback to the May low at around 11,500 points and then a bounce above the resistance at 13,000 points would form a bullish head and shoulders reversal pattern, which would be an important technical signal in favor. the end of the underlying downtrend.

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