The Nasdaq, after setting a two-year low just above 11000 on June 16, has moved into consolidation with a slight upward bias. The key negative factors have temporarily loosened the grip. But the pressure on stock indices may increase again in a short run.
Current statistics on the U.S. labor market for June could perform a role of the pressure element for the index. The last time the Nasdaq grew was the statistics release on November 5, 2021. The following 7 publications invariably led to the U.S. stock market fall, regardless of the labor market dynamics for the previous month. A Friday’s factor strengthens the probability of a decline: market participants tend to avoid risk and close their positions on the last business day.
Moreover, the market jitters will be aggravated by the start of Q2 reporting season next week. The previous reporting seasons in January-February and April-May significantly worsened investors' expectations in respect of the financial results of American companies (even though the completed quarters were quite successful). Currently, after good statements, the market insiders are more inclined to fix their profits rather than increase the investments.
Macroeconomic statistics are also clearly not conducive to the stock indexes: GDP has already started to decline, inflation updates the records since the 1980s, while the Fed keeps raising its key rate. Pessimism periods, as a rule, don’t last long, but the bottom of the fall is very likely to be renewed more than once in the present situation.
Now the Nasdaq has almost approached the previous local high at 12250. The blue line of the Stochastic indicator has reached the overbought zone, and may soon form a final sell signal. The level of 11500 can be singled out as the immediate fall target. A departure to new lows is more likely to be expected as the Fed session on July 27 nears.
The following trading options are offered:
Sell the Nasdaq at a price range of 12000-12250. Take profit 1 – 11500. Take profit 2 – 11000. Stop loss – 12500.
Alternatively, traders may use a Trailing stop instead of a fixed Stop loss at their discretion.