- NQ Futures edged higher on upbeat US data.
- FOMC minutes show a 50 bps rate hike is possible in July.
- Bulls can breathe again.
Today’s outlook for E-mini Nasdaq 100 (NQ) futures is bullish after upbeat US data pointed to slight economic growth, reducing market recession fears. The Institute of Supply Management released yesterday showed higher than expected activity levels in the non-manufacturing sector.
US job openings fell less than expected in May, suggesting the labor market was not as tight as investors had expected and that a recession might not be around the corner.
“Investors continue the tug of war between, ‘Should I be more worried about high inflation or the quickly deteriorating growth outlook?'” said Thomas Kennedy, chief investment strategist for J.P. Morgan Global Wealth Management. “Cross asset correlations over the last few weeks have suggested growth is the bigger worry for the market now.”
Investors also received the latest FOMC meeting minutes, which pointed to a central bank keen on restoring faith in its ability to control inflation. The minutes showed participants were ready for a 50 or 75 bps rate hike at the next meeting.
Investors expect a 75bps rate hike in the meeting later this month.
“I think people are heavily focused on the terminal rate of what the Federal Reserve’s increases are, and the 50-75 debate just points towards where you end up,” said Jason Pride, a chief investment officer of private wealth at Glenmede.
He noted that a 75bps hike could lead to a terminal rate of 3.25% or 3.5%, while 50bps to 3%. The likelihood of a recession increases with this rate.
Looking at the 4-hour chart, we see the price of NQ in a bullish trend. The price is trading well above the 30-SMA, showing bulls are in control. The RSI also supports bullish momentum as it is trading above 50.
The price might be headed for 12226.50 as the next target. This level acted as resistance back on June 27th and is, therefore, a critical level. The other possibility is for the price to retest the 11726.50 level before rallying. The trend will remain bullish if the price keeps trading above the 30-SMA and the RSI stays above 50. However, breaking below the 11726.50 level may look to test the 11395.25 level as the next support.