Traders eagerly are awaiting today’s second quarter US GDP release to see if interest rate forecasts will target a rate hike sooner. As quantitative easing fades, permanent bulls should be getting nervous as the stock market appears ready for potential range trading or maybe even a deep pullback.
Following the worst decline in two months for technology stocks, US futures are expecting a positive open as we await the 8:30 AM est release. Volatility could remain high as seasonality does support selling in September. On the technical side, we also have price tentatively poised to remain below the 50-day SMA.
The daily chart for the Nasdaq 100 currently shows a potential ABCD which supports the move lower. Even if we see a positive bounce post today’s GDP report, we may see any rally faded this morning. The reaction may be tricky today. A solid beat of 4.5% or higher q/q could support the Fed to complete its tapering process and drive yields higher for US treasuries and that could be bearish for stocks. A GDP miss and we could see a choppy reaction.
Key support will come from the 3823 level, while 4130 remains resistance. If we do see a deeper pullback target the 200-day SMA, which is currently trading near the 3775 zone, buying interest may return.
The trade: Sell US Tech at 4040, with a stop loss at 4080 and a take profit at 3960. The Risk/Reward Ratio is 1: 2
Edward J. Moya
WorldWideMarkets Online Trading