Nasdaq rises to new highs after ADP miss

On Wednesday, the tech-heavy Nasdaq 100 index soared to new all-time highs and was trading half a percent higher during the US session, seen at around 15,680 USD.

The dovishness and bullish sentiment is still felt in the markets as Jerome Powell gave all the bulls the green light last Friday , saying the Fed is in no hurry to taper and rates will remain at the current levels for an extended period of time.

ADP misses, manufacturing beats

Earlier in the day, August’s US ADP employment change report has been very weak (again) and the number came out at 374,000, a huge miss to the 638,000 new jobs expected , and it was below the lowest forecast polled by economists (+400,000).

Our data, which represents all workers on a company’s payroll, has highlighted a downshift in the labor market recovery. We have seen a decline in new hires, following significant job growth from the first half of the year, said Nela Richardson, ADP chief economist.

Again, the bad news was good news for the stock market, especially for the tech stocks, which surged immediately as traders might start pricing in another delay in the Fed’s tapering plans.

Additionally, the** ISM manufacturing survey for August came out better than expected and printed 59.9, up from 59.5 previously** and above analysts’ expectations of 58.5. However, the inflation component – prices paid – dipped notably, from 85.7 to 79.4, while the employment index worsened to 49, from 52.9 previously.

Still, while corporate results are robust, concerns about the delta variant, inflation spikes, supply bottlenecks, and stimulus tapering could easily trigger a 10%-20% drop in stock prices, said Ipek Ozkardeskaya, senior analyst at Swissquote.

Bulls remain in charge

The technical situation still appears bullish in whatever timeframe we look. The previous consolidation period, which lasted one month, has been broken to the upside, confirming the bullish bias. The next medium-term target will most likely be at the psychological barrier at 16,000 USD.

Alternatively, if the index starts dropping, the intraday support is near 15,600 USD, while the medium-term support could be at previous highs in the 15,200 USD region. Therefore, the index needs to stay above that level for the short-term outlook to look bullish.

However, US stocks are very overextended from their moving averages, usually leading to a correction, at least toward the 50-day average (for Nasdaq, that would be at 15,000 USD). Therefore, volatility could pick up any day, but still, the best strategy seems to be buying the dips.

Source: Tradingview.com