The Nasdaq 100 index rallied nearly 25% off the June lows to last week’s peak, but sellers have aggressively pushed prices down in recent days, leaving the index testing a key previous support/resistance zone around 12,900. This area put a floor under prices in March and April, and once the index broke below it, it acted as resistance in early June; coincidentally, the 50-day EMA also sits in the upper 12,000s, strengthening the importance of that area for technical traders.
Time will tell where the market goes from here, but given the weakness in other risk assets and our expectation of a relatively hawkish speech from Chairman Powell on Friday, we wouldn’t be surprised to see a break lower heading into September. In that scenario, the next level of support to watch would be around 12,200.
Meanwhile, a confirmed bounce from this key level could take the index back toward the summer highs and the 661.8% Fibonacci retracement of the March-June fall at 13,700 in September.