Nasdaq to Outperform Dow Jones as Reflation Commerce Loses its Luster

Nasdaq, Dow Jones, Reflation Commerce, Treasury Auctions, CPI Information – Speaking Factors:

• Sturdy demand for Treasuries and a comparatively in-line inflation print may open the door for the tech-heavy Nasdaq to outperform the Dow Jones within the coming weeks.

Asia-Pacific Recap

Fairness markets gained floor throughout Asia-Pacific commerce as buyers dismissed a notable rise in US inflation knowledge in a single day. Australia’s ASX 200 climbed 0.66% on the again of the native client sentiment index climbing to an 11-year excessive. Hong Kong’s Grasp Seng Index surged 1.23% and China’s CSI 300 rose 0.71%. Japan’s Nikkei 225 proved to be the laggard, sliding 0.44% as coronavirus infections continued to climb in Osaka.

In FX markets, the cyclically-sensitive Australian and New Zealand {Dollars} outperformed their main counterparts, whereas the haven-associated Japanese Yen and US Greenback slipped decrease. Gold costs nudged marginally increased as yields on US 10-year Treasuries stabilized at 1.63%. Wanting forward, speeches from a number of members of the Federal Reserve and ECB President Christine Lagarde headline the financial docket, alongside industrial manufacturing figures out of the Euro-area.

CPI Information, Strong Treasury Demand to Buoy Tech Sector

The tech-heavy Nasdaq 100 index might outperform the benchmark Dow Jones within the close to time period, because the Reflation Commerce that noticed yields surge increased in latest months pauses for breath.

Though client value inflation knowledge launched in a single day got here in hotter than consensus estimates, at 2.6% (exp. 2.5%), this did not concern market individuals who appeared to have priced in a extra aggressive print.

Certainly, US 10-year Treasury yields slipped decrease instantly after the discharge. Sturdy demand for longer-term Treasuries on the 30-year public sale additionally accelerated the decline in charges of return, with the bid-to-cover ratio – a measure of demand – coming in nicely above common.

US Shopper Value Inflation (2015 – Current)

The paused rollout of Johnson & Johnson’s coronavirus vaccine, following a handful of uncommon blood clotting occasions, additionally seems to have pushed capital flows into haven-linked bonds.

This dynamic will possible pave the way in which for the length commerce to realize favour as soon as once more, with the tech-heavy Nasdaq 100 most likely main US benchmark indices increased within the coming weeks.

Dow Jones Futures Day by day Chart – Wedge Resistance In Focus

Chart ready by Daniel Moss, created with Tradingview

From a technical perspective, the Dow Jones’s outlook seems considerably bearish as costs wrestle to penetrate psychological resistance at 33,700.

Beneath common quantity, in tandem with the RSI sliding again into regular territory, counsel that bullish momentum is fading.

A day by day shut again beneath the 8-EMA (33439) may intensify near-term promoting strain and generate a pullback to former resistance-turned-support on the March excessive (33134).

Alternatively, a push above the month-to-month excessive (33712) to contemporary file highs would possible sign the resumption of the first uptrend and convey the 33400 mark into play.

The IG Consumer Sentiment Report exhibits 31.58% of merchants are net-long with the ratio of merchants brief to lengthy at 2.17 to 1. The variety of merchants net-long is 22.51% increased than yesterday and 4.14% increased from final week, whereas the variety of merchants net-short is 11.59% decrease than yesterday and 4.64% decrease from final week.

We usually take a contrarian view to crowd sentiment, and the very fact merchants are net-short suggests Wall Road costs might proceed to rise.

But merchants are much less net-short than yesterday and in contrast with final week. Current adjustments in sentiment warn that the present Wall Road value development might quickly reverse decrease regardless of the very fact merchants stay net-short.

Nasdaq 100 Futures Day by day Chart – RSI Hints at Additional Features

Chart ready by Daniel Moss, created with Tradingview

The Nasdaq, then again, appears poised to increase its push to contemporary file highs as costs slice simply by February excessive (13900) resistance.

With the MACD surging to its highest ranges since late-February, and the RSI eyeing a push into overbought circumstances, the trail of least resistance seems skewed to the upside.

Remaining constructively positioned above 13900 means that the Nasdaq will proceed climbing increased within the close to time period, with the 78.6% Fibonacci enlargement (14530) the subsequent key stage of resistance.

Nonetheless, if help provides approach, a decline to the 8-EMA (13734) might be on the desk.

— Written by Daniel Moss, Analyst for DailyFX

Comply with me on Twitter @DanielGMoss