Testing the Uptrend Terrain
The US markets have kicked off the new quarter with a downward trend, scrutinizing the fortitude of the existing uptrend. Since hitting the lows in January, the indices have been treading a narrow path of growth.
Current Market Situation
Recent movements have seen the indices challenging the lower boundary of the trend channel, with index futures now skimming this line, lingering around the 5200 mark. The proximity to this juncture signals a higher likelihood of rejuvenated upwards movement towards the upper boundary residing around 5330.
Potential Scenarios
To invalidate the bull scenario, the index would need to retreat below the preceding local lows at 5130. A more substantial descent to 5075, aligning with the 50-day moving average and the market consolidation of early March, remains a plausible outcome. Such a dip would represent a classic Fibonacci retracement of the surge from the January lows.
Meanwhile, the Nasdaq 100 seems to be experiencing a temporary slump, retracing from the recent highs. The focus now hovers around the 18000 level, a point that has historically attracted buying interest multiple times since the year commenced.
Cautious Outlook
A scenario where the Nasdaq 100 plummets below 18000 within the next week could potentially trigger a more profound correction akin to the one witnessed between July and October last year. However, this supposed sell-off might find support near the 200-day MA, currently situated at 16150 but projected to reach 16500 before the month concludes.
Market participants are understandably cautious given the substantial surge in stock prices and other risk assets post the first-quarter results. The impending labor market report on Friday adds another layer of uncertainty. It is crucial to remember that countertrend moves are an inherent part of market dynamics.
It remains premature to draw any definitive conclusions regarding the growth trajectory or the depth of the correction until the market’s response to the upcoming Non-Farm Payrolls report is observed.