Nasdaq 100 index futures (NQ)

E-mini Nasdaq 100 (NQ) Futures: Threat of Aggressive Fed Looms Over the Markets

  • Markets expect the Federal Reserve to take action against rising inflation.
  • Nvidia expects a 19% drop in Q2 revenue.
  • Tesla shares rose 0.8% after announcing contracts worth around $5 billion.

Wall Street ended Monday’s trading day unchanged after last week’s massive jobs report confirmed expectations that the Federal Reserve will take action against inflation.

Stock futures dropped from earlier highs after last week’s shocking labor market report was initially interpreted as a sign the economy might survive aggressive interest rate increases by the Fed to manage inflation at four-decade highs.

“With labor market strength, the threat of a recession seems remote, but concerns over how aggressive the Federal Reserve could be hovering over the market,” Quincy Krosby, chief global strategist for LPL Financial, said in an email.

Investors are now waiting for consumer pricing data on Wednesday to determine whether the Fed will loosen up a little on its fight against inflation and give the economy a healthier foundation for expansion.

“The CPI data will help to confirm if the Fed’s tightening efforts have been successful in starting to tame inflation or if continued Fed tightening is needed,” said Robert Schein, chief investment officer at Blanke Schein Wealth Management.

The information technology sector dropped 0.9 percent as chipmaker Nvidia Corp dropped 6.3 percent on the company’s announcement that it anticipates second-quarter revenue to fall 19% from the prior quarter to around $6.7 billion due to weakness in the gaming industry.

Tesla increased by 0.8 percent as the American electric vehicle manufacturer announced contracts worth around $5 billion to purchase battery components from Indonesian nickel processing firms.

Technical Outlook for the E-mini Nasdaq futures (NQ)

E-mini Nasdaq 100 (NQ) futures 1-hour chart
E-mini Nasdaq 100 (NQ) futures 1-hour chart

The E-Mini Nasdaq futures (NQ) has formed a rising wedge on the hourly chart, which started on the 2nd of August. Prices have broken below the trend line support and are consolidating on the hourly chart at a minor support zone. There could be some buying pressure within the price range at 13077.5 and 13125.25.

On Friday the 5th of August, we saw a high made at 13384.50, which formed the first connection point for our horizontal resistance line on the ascending triangle. Prices swiftly retraced to 13085 before rallying again toward the previous high of 13384.50 during Monday’s trading session. Once the market approached that last high, we saw immediate selling pressure in the market resulting in the formation of a False Break candle. This formed the second resistance point for our ascending triangle.

With prices trading within the support zone noted above, we can expect some sort of buying pressure to occur. This could potentially increase the price of NQ to test the daily pivot point at 13,241. If we get a solid bullish momentum, we could see the price move further higher into the ascending triangle horizontal resistance and around R2 of the daily pivot.

However, if the support zone does not hold, we can anticipate the price of NQ to fall to the S2 on our pivot points indicator.