NAS100 Subdued as ARM Optimism Fizzles & the Fed Comes Closer

NAS100 Analysis

The tech world got a lift last Thursday from Arm's strong debut on Nasdaq, which gained 25% in the first day of trading. Optimism around the chip-designer IPO faded and its stock dropped over the following two days, as investors now turn their attention to the impending Fed decision on Wednesday, which will shape Wall Street's path.

Markets widely anticipate a pause and believe that rates have already peaked at current 5.5%, but there is less faith in regards to the latter. Inflation has moderated significantly and the Fed may have already done enough with its massive tightening, given the lags in the transmission mechanism.

However, inflation is still high with rising oil prices putting upwards pressure, while the economy and the labor market are strong, despite some cooling. Given the above, Chair Powell has maintained a hawkish bias and kept more hikes firmly on the table in his Jackson Hole speech last month ^[1]. Focus will be on the updated forecasts around the appropriate policy path and Mr Powell's press conference for more insights around the next steps.

NAS100 extended its AI-fueled rally in July, but despite Nvidia's blockbuster results, it runs its second straight negative month, as the Fed's higher for longer narrative gained traction. It is constrained by the daily Ichimokou Cloud and the breach of the EMA200 creates scope for further pressure towards the pivotal confluence of supports at around 14,700. However, we are cautious around sustained weakness and the downside appears well protected. Despite the recent lackluster performance, NAS100 is resilient and the correction has been limited so far, keeping the road open to new 2023 highs (15,946).