Nasdaq 100 update, the Nasdaq-100 Index has shown resilience and strength, indicating that its historic bull market is not over yet.
Rich Ross, the head of technical analysis at Evercore ISI, believes that both the Nasdaq-100 and the S&P 500 are on track to reach historic highs in the first quarter of 2024. Since the beginning of 2023, the Nasdaq-100 index has nearly doubled, adding around $14 trillion in market capitalization. This remarkable growth has caught the attention of investors and analysts alike, raising questions about its sustainability.
Last week, U.S. Treasury yields surged to multi-month highs, prompting investors to scrutinize economic data for clues about the Federal Reserve's next interest rate move following Donald Trump's presidential victory. Concerns have emerged that Trump’s economic agenda—characterized by high import tariffs and aggressive immigration policies—could exacerbate inflation and hinder growth. This scenario potentially limits the Fed's ability to lower borrowing costs, which can diminish the appeal of interest-sensitive sectors, particularly high-valued industries like technology.
However, the yield on the 10-year U.S. Treasury bond has since retreated. Ross indicates that, in this context, along with positive technical signals, both the Nasdaq-100 and the S&P 500 appear well-positioned to achieve new all-time highs in the upcoming months. He asserts, “Ultimately, tech stocks will continue to lead the market higher.”
According to Bloomberg data, as of Tuesday, the Nasdaq-100 has spent 467 trading days above its 200-day moving average—marking the second-longest stretch since the index was established four decades ago. Currently, the Nasdaq-100 is approximately 10% above its long-term support level, signaling a relatively stable trend for technical analysts who monitor moving averages and other indicators to gauge market direction.
The next few weeks are critical for the stock market, as major technology companies prepare to announce their quarterly earnings. The Federal Reserve's upcoming policy decision on January 29 adds another layer of anticipation. As earnings season unfolds, investors will be keenly listening to executives' forecasts for the months ahead. The upcoming week is expected to be the busiest of the earnings season, with reports from Apple (AAPL), Microsoft (MSFT), and Meta Platforms Inc. (META) on the horizon.
John Kolovos, technical strategy chief at Macro Risk Advisors, is currently tracking the largest exchange-traded funds (ETFs) that follow the Nasdaq-100. He identifies important technical support levels between $485 and $495 for a particular ETF, near its November lows. Kolovos believes that any pullback remaining above this range presents a buying opportunity.
He states, “The decline in bond yields enhances market breadth and participation. Technical analysts are also watching whether Apple stock will attract buying interest as it approaches its 200-day moving average.”
Last week, the yield on the 10-year U.S. Treasury briefly surpassed 4.8%, reaching a peak for 2024 before subsequently dropping more than 20 basis points to hover around 4.57%. For Kolovos, the next key support level for benchmark U.S. Treasury yields is at 4.5%, close to its 50-day moving average and the peak observed last November. He is also monitoring resistance levels at 4.8% and the year-end high of 5% for 2023. The 14-day relative strength index for the 10-year Treasury yield crossed above 70 two weeks ago, indicating potential overbought conditions according to some technicians.
As the Nasdaq-100 sits about 2.4% below its record high from December, chip stocks have reached new highs relative to software stocks. This trend, noted by Ross at Evercore ISI, suggests that traders are increasingly favoring semiconductor manufacturers like Nvidia (NVDA), which have been pivotal in driving the bull market over the past two years.
Bloomberg data shows that the VanEck Semiconductor ETF (SMH), which holds leading companies like Nvidia, Applied Materials (AMAT), and Advanced Micro Devices (AMD), has outperformed the Shares Expanded Tech Software Industry ETF (IGV) in five of the past six weeks.
Ross explains, “Rising yields exert unique pressure on small-cap and cyclical stocks. Therefore, when yields ease, our first instinct is to repurchase those stocks that have been hit hard... When the dust settles, we return to large tech companies with strong long-term trends, substantial cash reserves, and competitive advantages.”
The outlook for the Nasdaq-100 and S&P 500 remains optimistic as both indices demonstrate strong technical signals and are poised for further gains in the first quarter of 2024. Despite concerns about rising bond yields and their impact on interest-sensitive sectors, the underlying strength of technology stocks and favorable market conditions suggest that the bull market has room to run. Investors should remain vigilant as earnings reports approach and monitor key technical indicators, as these will play a crucial role in shaping market sentiment in the coming weeks.
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Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.
