The financial market stands at a crucial juncture, navigating through the intricate web of technical analytics and fundamental developments. As we advance into a new phase marked by the initiation of a Gann time cycle, the landscape is further complicated by the anticipation of increased macroeconomic volatility. This volatility is primarily attributed to the policy directions and market expectations set forth by the reinstated administration under President Donald Trump.
Rewinding to the recent past, the market reached a zenith of 23,845 on the 28th of July. However, it subsequently embarked on a downward trajectory, bottoming out at 22,775. This movement marked the culmination of a 9-day corrective period, precisely aligned with Gann’s theories, a noteworthy pivot that perhaps sets the stage for an anticipated bullish rally. As projections would have it, the early stages of a 3-day ascending cycle seem to have been set into motion, aiming for a pinnacle on the 9th of August.
From a technical perspective, the Nasdaq (/NQ) has shown resilience, reclaiming its position above the Daily VC PMI at 23,002 and maintaining its stance above the Weekly pivot at 23,168. These indicators suggest an ongoing short-term bullish sentiment. Nevertheless, a significant challenge looms overhead in the range of 23,430 to 23,619. This bracket is populated by a confluence of Fibonacci retracements and Square of 9 harmonic arcs, which, to date, have stymied any further advancements.
Yet, the narrative extends beyond mere technical analysis. The broader macroeconomic and political environments have undergone a profound transformation, with significant ramifications for the marketplace. The Trump administration has signaled a return to a more confrontational posture on several fronts, which includes revisiting tariffs, deregulation efforts, and exerting pressure on the central banking system. Such shifts are keenly influencing the behavior of Nasdaq prices.
Specifically, there are reports indicating that the White House is gearing up to unveil a fresh suite of tariffs targeting a range of technologies from China, including AI chips, green technology, and robotics components. These actions are justified on the grounds of national security concerns and alleged violations of intellectual property rights. This development injects an element of geopolitical uncertainty, particularly affecting the larger technology firms with sprawling global supply chains and exposure to Chinese manufacturing.
In parallel, President Trump has not shied away from critiquing the Federal Reserve, questioning the necessity of current interest rate levels. Despite these critiques, the Federal Reserve, under Chairman Jerome Powell, maintains its independence, grounding its decisions in empirical data. This dynamic is viewed against the backdrop of an impending policy decision at the Federal Open Market Committee meeting scheduled for the 17th and 18th of September.
Fed Fund Futures currently suggest there’s a 40% likelihood of an interest rate hike in September. Reinforcements in job growth and a rise in wage inflation lend credence to a potentially hawkish stance by the Fed, notwithstanding political pressure. Should the Consumer Price Index data, due on the 13th of August, surprise on the upper side, the odds of a September rate increase could surge, exerting additional pressure on growth-oriented stocks and Nasdaq valuations.
The second Trump administration poses distinctive macro risks:
- Geopolitical tensions might escalate, especially regarding trade in semiconductors, cloud infrastructure, and AI exports.
- The “America First” policy stance of the Trump administration introduces uncertainty for multinational tech firms, especially those entangled in cross-border licensing and intellectual property issues.
- Elevated bond yields, with the 10-year yield persisting above 4.45%, tighten financial conditions and impact forward earnings multiples.
From a technical and fundamental viewpoint, although the Nasdaq (/NQ) is in a recovery phase, it confronts formidable resistance at 23,619. This threshold epitomizes the confluence of the Square of 9’s 405° harmonic and the 78.6% Fibonacci retracement from the recent peak. A decisive break above this frontier could pave the way to retest 23,845, and possibly, scale new heights if momentum is aligned.
However, the assertive policy recalibration by the Trump administration, combined with the hawkish undertones from the Federal Reserve, crafts a brittle environment susceptible to headline-driven volatility for Nasdaq stocks.
In conclusion, the current market scenario epitomizes a battleground where policy decisions, monetary dynamics, and timing converge. For investors and traders, this context demands a blend of clarity, discipline, and preparedness. Navigating this landscape means letting technical charts guide entry points while remaining cognizant of the overarching macroeconomic currents to inform risk management and position sizing strategies.
Disclaimer: Trading derivatives, financial instruments, and precious metals involves significant risk of loss and may not be suitable for everyone. Past performance is not necessarily indicative of future results.
