Nasdaq 100 bounces off 50ema – new record high coming?

By Admiral Markets

US stock market indices put in a huge reversal in yesterday’s trading after comments from Federal Reserve Chairman Jerome Powell signalled that the bank would continue to buy bonds even as the economic outlook has started to improve.

Currently, the Fed is buying $120 billion worth of assets per month. This breaks down into $40 billion of mortgage-backed debt and $80 billion of Treasuries. The push higher in indices that developed over Powell’s speech also coincided with significant technical support levels on some of the major US indices.

Source: Admiral Markets MetaTrader 5, NQ100, Daily – Data range: from Oct 8, 2020, to Feb 23, 2021, performed on Feb 23, 2021, at 8:30 pm GMT. Please note: Past performance is not a reliable indicator of future results. 

Last five-year performance: 2020 = +47.34%, 2019 = +38.28%, 2018 = -0.55%, 2017 = +30.87%, 2016 = +5.18%, 2015 = +8.28%.

In the daily price chart of the Nasdaq 100 index above, it’s clear to see the rejection of the 50-period (red) exponential moving average. More significantly, price broke through the moving average before pushing back above the moving average price level. This could be a base for buyers to build upon.

However, the significant pullback that has developed is much deeper than previous pullbacks suggesting there has been more selling than previous occasions. Subsequently, traders may then look for clues on lower timeframes such as the 1-hour chart which is shown below.

Currently, on the 1-hour chart price is trading well below its moving averages with the 20-period (blue), 50-period (red) and 100-period (green) exponential moving averages all pointing lower.

Source: Admiral Markets MetaTrader 5, NQ100, H1 – Data range: from Feb 11, 2021, to Feb 23, 2021, performed on Feb 23, 2021, at 8:30 pm GMT. Please note: Past performance is not a reliable indicator of future results. 

If buyers do step back into the market some traders may wait for the price to move back above the 1-hour moving averages as a confirmation of buying activity outweighing any selling. These clues may lead other buyers to step in, potentially forcing the index back to its all-time price level and a potential breakthrough to new record highs.

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