Nasdaq 100 Manages to Climb Out of a Hole, Will the Nikkei 225 and ASX 200 Follow?

Nasdaq 100, Nikkei 225, ASX 200, China Loan Prime Rates, Chengdu, Technical Analysis – Asia Pacific Indices Briefing

Monday’s Wall Street Trading Session Recap

Market sentiment cautiously improved to start off the new trading week, but it was not all smooth sailing. On Wall Street, the Nasdaq Composite, S&P 500 and Dow Jones gapped lower at the beginning of the session. Prices proceeded to rally into the close, ending in the green on Monday.

Looking at the table below, materials, consumer discretionary and industrials were the best-performing sectors in the S&P 500 at 1.63%, 1.34% and 1.33%, respectively. This is as health care (-0.54%) and real estate (-0.22%) underperformed.

This kind of volatility might be expected considering the highly anticipated Federal Reserve interest decision on Wednesday. After last week’s US CPI reading showed sticky price pressures persisting in core metrics, some traders started to price in the odds of a 100-basis point hike this week.

Still, the base scenario is a 75-bps increase. Looking at market pricing, it seems traders took off some bets of a full percentage point rise over the past 24 hours. But, about a 20% chance remains. This does mean that there is more room to trim those expectations ahead of the Fed. But, this is unlikely to take volatility away down the road.

S&P 500 Sector Breakdown 9/19/2022

Data Source: Bloomberg, Chart Prepared by Daniel Dubrovsky

Nasdaq 100 Technical Analysis

Nasdaq 100 futures left behind a Hammer candlestick pattern at the end of last week. On Monday, upside confirmation was achieved. This is opening the door to a near-term reversal. But, the falling trendline from August is maintaining the downside focus.

Nasdaq Futures Daily Chart

Chart Created in TradingView

Tuesday’s Asia Pacific Trading Session

The rosy session on Wall Street could be a precursor to a similarly upbeat day for Asia-Pacific equities on Tuesday. Futures tracking Wall Street indices are in the green. This may open the door for Japan’s Nikkei 225 and Australia’s ASX 200 index to push higher. The economic docket is light outside of Chinese loan prime rates and Reserve Bank of Australia meeting minutes. The former are anticipated to remain unchanged for September. China also recently lifted a 2-week lockdown in the megacity of Chengdu. That could further compound upbeat market sentiment in the coming hours.

Nikkei 225 Technical Analysis

Nikkei 225 futures left behind a Bullish Engulfing candlestick on Monday. Further upside confirmation could open the door to extending gains. Still, the falling trendline from August is maintaining the broader downside focus.

Nikkei 225 Daily Chart

Chart Created in TradingView

ASX 200 Technical Analysis

The ASX 200 was unable to clear immediate support, which is the 61.8% Fibonacci retracement at 6683. Immediate resistance seems to be the midpoint of the retracement at 6767. Confirming a breakout above the latter could open the door to extending gains. But, a bearish Death Cross between the 20- and 50-day Simple Moving Averages recently formed, offering a downward bias.

ASX 200 Daily Chart

Chart Created in TradingView

— Written by Daniel Dubrovsky, Strategist for DailyFX.com

To contact Daniel, use the comments section below or@ddubrovskyFXon Twitter