February 15, 2024/Capital.com

By Daniela Hathorn, Senior Market Analyst at global retail trading platform, Capital.com

“US equity indices took a tumble earlier this week after the latest CPI data showed prices had risen more than expected in January, pushing back the need for rate cuts from the Federal Reserve. But stocks have come back swinging with the S&P 500, Nasdaq 100 and Russell 2000 all resuming their bullish trends after a minor pullback.

The lack of appetite to be a seller in current conditions has allowed the Nasdaq 100 to reset its overbought position with just a marginal pullback and a limited impact on price—this sets the scene for further bullish momentum to arise. 

The recent shift in market mentality has allowed stock traders to accept strong economic data without fearing continued high rates. But markets should have the same concerns as the Fed —which is cutting too soon and then having to hike again. That would likely be the worst-case scenario for the bullish rally. For now, however, if the economy is showing resilience, and encouraging the Fed to hold off cutting rates, then so be it— or at least that is how markets seem to have been behaving over the past few days. 

With this in mind, the index seems in good shape to continue pushing the recent highs. Nonetheless, traders should be aware that the Nasdaq 100 has a bearish RSI divergence underway, with the highs in price not having been matched by the highs in the RSI. This might suggest a bigger reversal could be on the cards in the short term.”