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Nasdaq 100 & ARKK Blast Higher, but US CPI Data May Spark a Reversal. Dead Cat Bounce?


NASDAQ 100 & ARKK OUTLOOK

  • Nasdaq 100 builds on yesterday’s afternoon restoration and jumps 1.47%
  • ARKK additionally phases a strong rally, however the near-term outlook for development performs stays bearish
  • Wednesday’s U.S. inflation knowledge might spark a pullback in threat belongings. This implies the current rebound could also be a “lifeless cat bounce”

Most learn: US Charges Run as Markets Gear Up for Doable March Fee Hike

After yesterday’s exceptional turnaround, the Nasdaq 100 prolonged its rebound on Tuesday as Fed Chairman Powell’s look in entrance of Congress introduced no new hawkish surprises, attractive dip patrons to scoop up a number of the hardest-hit tech shares this 12 months.

On the closing bell, the Nasdaq 100 surged 1.47% to fifteen,844 whereas the S&P 500 rose 0.92% to 4,713. In the meantime, the blue-chip Dow Jones underperformed the main fairness averages, rising 0.51% to 36,251. Elsewhere, probably the most speculative corners of the market posted large positive factors, 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 economic system 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 properly prematurely, in order that they didn’t spark a unfavourable 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 selections relating to stability sheet discount, underscoring that it could take 2 to 4 conferences to achieve a willpower on trimming belongings.

The market appears to have taken consolation from the suggestion that the tightening cycle won’t be as aggressive as many started to concern within the wake of the FOMC minutes, however buyers could also be getting forward of themselves in making an attempt to front-run future coverage actions, in any case, the basic image hasn’t modified in a single day. That stated, sentiment may shift once more as soon as Wall Road digests the newest inflation report.

Tomorrow morning, the U.S. Bureau of Labor Statistics will launch final month’s Client Worth 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 stage since early 1982. The core gauge can also be seen accelerating, seemingly rising from 4.9% y/y to five.4% y/y, an indication that inflationary pressures are broadening within the economic system and should not pushed solely by a couple of unstable classes.

KEY EVENTS FOR WEDNESDAY

Nasdaq 100 & ARKK Blast Higher, but US CPI Data May Spark a Reversal. Dead Cat Bounce?

Supply: DailyFX Financial Calendar

A scorching CPI report will elevate wagers that the Federal Reserve will act rapidly and forcefully to pullback help with a view to curb hovering costs. Consequently, the market may start to cost in a fourth hike for 2022 with extra conviction and an earlier begin to the stability sheet runoff. These expectations will put upward strain on the Treasury curve, fueling volatility and weighing on costly rate-sensitive shares resembling these within the expertise and development house. 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 might quantity to a “lifeless cat bounce.”

ARKK TECHNICAL ANALYSIS

ARKK has rebounded off key help 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 stage. On the flip facet, if promoting exercise begins to extend once more and the value pivots decrease, help is seen at 81.50/80.10. If bears breach this flooring, ARKK could have few obstacles to retreat in the direction of the 74.00 space within the short-term.

ARKK TECHNICAL CHART

Nasdaq 100 & ARKK Blast Higher, but US CPI Data May Spark a Reversal. Dead Cat Bounce?

ARKK chart ready utilizing TradingView

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—Written by Diego Colman, Contributor



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