The medium and long-term uptrends remain intact, but the short-term situation is unclear as indices fail to post new highs, which is often needed to confirm the bullish momentum. Later in the day, US building permits are expected to post a marginal increase to 1.61 million from 1.594 million previously, while housing starts will most likely decline, from 1.643 million to 1.6 million. Soaring home prices have led to record optimism in the housing building sector, but on the other hand, the higher the prices go, the less demand from consumers.
FOMC minutes under scrutiny
Afterward, the focus of market participants will shift to the FOMC minutes from July’s decision. Equity bulls are hoping for a dovish tilt. However, it looks like the Fed will be required to taper its QE program sooner rather than later, mainly due to the soaring inflation. Economists at MUFG noted on Wednesday that:
Should there be a hawkish surprise in the minutes, we could see a decline in US indices. But overall, it seems that equity markets have not been pricing in any monetary policy tightening at all. Judging by the US yields, the market has given up hopes for tightening as yields have peaked in April and have moved notably lower since then.
Technical situation still bullish
The Nasdaq 100 index tested its 21-day Exponential Moving Average, which tends to be stronger support sometimes. So far, the price is bouncing off that level, and the short-term outlook seems bullish. The index has been consolidating in a triangle pattern, and volatility has declined, which is usual for this type of consolidation. However, the market is getting ready to explode from the triangle, and the direction could be set after today’s FOMC minutes.
Initial resistance is now found at the upper line of the triangle near 15,130 USD. If the price jumps above it, the next target is at the current cycle highs of 15,200 USD. The medium-term target remains at 16,000 USD. Alternatively, if a breakdown from the triangle occurs, the next support could be found at 14,800 USD, before 14,600 USD. The bearish scenario could be reinforced by the negative divergence between the MACD indicator and the price.