The bearish stance seems overdone. The Nasdaq could snap back into shape if 4 of the Mag-7 report okay results amid Fed week
Four of the Mag-7 tech stocks—Microsoft $Microsoft(MSFT.US$, Amazon $Amazon(AMZN.US$, Meta $Meta Platforms(META.US$, and Apple $Apple(AAPL.US$ —are releasing earnings reports and outlooks this week while the Fed meets. This comes at a time when the Nasdaq is down 8% from its peak. The Nasdaq's bearish momentum seems stretched, a bit like a rubber band that could be due to bounce back into shape. The technical indicators are giving off similar signals to those seen in April, when the market fell and then investors rushed in—buying into the dip.
On the other hand, if we get bad news, with the Nasdaq 100 $Invesco QQQ Trust(QQQ.US$ already down 8% from its peak and trading under its 50-day moving average, the market is in bearish mode. However, given the bullish outlook for markets over the longer term, supported by Fed rate cuts, and posititive earnings, one could argue the market dip(s) would be bought if it fell much further.
Playing devil's advocate, yes, risks are creeping into markets, and yes, Middle East tension is picking up again after Israel attacked Hezbollah. However, there are calls for a ceasefire.
On the positive side, should the Mag-7 names report better-than-expected results and outlooks and the Fed not say "boo," then the Nasdaq could rally, given it appears oversold. It appears the trend could shift, as the last time the Nasdaq was this oversold was April—it hit new lows before heading higher.
Speaking of middle-east tension picking up, Australia has signed a $1.4 billion deal with ASC to upgrade its Collins class submarines while the country waits for delivery of nuclear-powered vessels as part of the Aukus agreement. This puts defence stocks back in the limelight too after many such as Lockheed and the defense ETF ITA $Ishares Trust U.S. Aerospace & Defense Etf(ITA.US$ hit new highs last week. So that's something we shall continue to watch.
July FOMC Meeting and US Jobs report to hint of a Sept cut. But the white flag will come from Jackson Hole
The FOMC is expectedto keeprates on hold on July 31 (at the upper band of 5.5%)while setting the stage for a 0.25% ratecut in September with inflation appearing to be on track to return to its 2%target. Meanwhile data continues to show the consumer needs a helping hand, with credit card delinquencies are at record highs.
Yes the market is expecting Fed Chair Powell to hint a September cut is on the table when speaking at the post-meeting press conference. But we see a more definitive signal coming at the Jackson Hole address as the Fed will then have another inflation and jobs report in hand.
'This weeks US jobs data, is also expected to show further evidence that the average US consumer and business will need some reprieve. US layoffs are slowing but job openings are falling. This weeks release from the JOLTS Job Openings report, to the non farm payrolls data (due Aug 2) to further solidify this.
Trading items to watch:
· Tech listed in US QQQ $Invesco QQQ Trust(QQQ.US$, SQQQ $ProShares UltraPro Short QQQ ETF(SQQQ.US$, TQQQ $ProShares UltraPro QQQ ETF(TQQQ.US$ .
· Defense stocks and ETFs amid middle-east tension; ITA $Ishares Trust U.S. Aerospace & Defense Etf(ITA.US$ Lockheed Martin $Lockheed Martin(LMT.US$ , Raytheon $Raytech Holding(RAY.US$, RTX $RTX Corp(RTX.US$ and DroneSheild $Droneshield Ltd(DRO.AU$
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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Moomoo Official Market Strategist
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