Nasdaq Tests 200-DMA, Awaits Inflation Report
10 February 2022
US equities rallied sharply yesterday as traders seem to be ignoring rising yields and more hawkishness by the Fed, sending the Nasdaq 100 index more than 1% higher on Wednesday.
Later today, January's US CPI inflation report is due. Inflation is seen rising 0.5% on the month and 7.3% on the year, which would be the highest level in almost 40 years. In addition, core inflation will likely increase further to 5.9% yearly.
The Nasdaq index rose to the 200-day moving average at 15,100 USD (the green line), but so far, it has failed to breach above it. On the other hand, the SP500 and Dow Jones indices trade comfortably above their respective 200-day averages.
Should the Nasdaq jump above the 200DMA, we might see another leg higher, targeting February highs near 15,265 USD.
Alternatively, if the risk-off sentiment returns after the CPI report, we could see a decline to yesterday's lows at 14,700 USD, while the key support for the next days is located in the 14,400 USD area.
Volatility is expected to be elevated in the near future as the Fed is about to start hiking rates, a process that usually brings significant market volatility.