Nasdaq 100 futures (NQ)
Fundamental Analysis

E-mini Nasdaq-100 (NQ) Futures Suffer amid Poor Business Activity in the US

  • Investors following market patterns are bullish.
  • Investors with access to inflation and earnings data are bearish.
  • Overall market sentiment is bearish on renewed recession worries.

Investors following market patterns are becoming more optimistic about the U.S. stock market’s recovery, raising expectations for E-mini Nasdaq 100 (NQ) in the second half of 2022.

Stronger-than-expected corporate earnings and confidence that the economy might avoid a recession could support stock futures even as the Federal Reserve boosts interest rates to control inflation.

This year’s stock market gains have historically been fleeting, and many market participants think it is still too early to be upbeat. Officials from the Federal Reserve have highlighted that the institution still has a lot of work to reduce inflation. 

However, those who base their investment choices on market phenomena like breadth, momentum, and trading patterns see a more positive picture. They are becoming more confident that the recent gains in equities are unlikely to reverse.

Several indicators “suggest that that low we had in June is certainly more durable than the low we had in May or March,” said Willie Delwiche, an investment strategist at All Star Charts. “It’s a rally that can be leaned into, not one that needs to be feared at this point.”

Recently, the trend has changed. For the first time this year, on a weekly basis, new highs on the New York Stock Exchange and Nasdaq outnumbered new lows last week. This is promising news for Delwiche and other strategists.

“The beginning of sustainable rallies usually starts with a large percentage of stocks rallying together,” said Ed Clissold, chief U.S. strategist at Ned Davis Research.

On the other hand, some believe there will be further downside moves. Stocks generally bottom when the sum of inflation and trailing price/earnings is less than 20, according to analysts at BofA Global Research. Right now, that figure is at around 28.5.

Stocks have dropped recently in the wake of soft US economic data that suggested the economy was suffering. This heightened recession fears and saw investors scrambling for safety.

Recession fears stemming from poor business activity (Source: S&P Global)

If the US economy is not doing well, the Fed will be forced to come out guns blazing, which could cause a recession. The overall sentiment on the E-mini Nasdaq-100 (NQ)  futures looks bearish and prices may likely see lower prices if the bearish outlook continues.