Nasdaq 100 index: Blurry vision ahead of Fed rate decision

The Nasdaq 100 index has moved into a consolidation phase in the past few weeks as the stocks winter continues. The index was trading at $15,257 on Monday, where it has been throughout the month. It has dropped by more than 3.52% from the highest level this year.

Federal Reserve ahead

The Nasdaq 100 index started the year well and has already jumped by more than 40% this year. Recently, however, the index – together with the S&P 500 and Dow Jones – have remained in a tight range. 

There are a few reasons for this. For example, there are signs that the Chinese economy is slowing down. Recent economic numbers raised doubts about whether China will achieve its target of a 5% growth rate this year.

China is an important country for American stocks because of the volume of trade between the two countries. Most tech companies like Tesla, Apple, and Nvidia have deep links in the country.

Second, the Nasdaq 100 index has struggled as the Artificial Intelligence (AI) hype eases. Shares of some of the biggest beneficiaries of the AI industry like Nvidia, Microsoft, and C3.ai have retreated recently.

Third, there are concerns about the rising interest rates in the US. Rates have risen to between 5.25% and 5.50%, the highest level in over two decades. In most periods, the tech-heavy Nasdaq 100 index lags in periods of high rates.

The key catalyst for the Nasdaq 100 index will be the upcoming Fed decision. Economists polled by Reuters believe that the Fed will decide to leave rates intact between 5.25% and 5.50%. If this happens, the pause will be hawkish since the bank will insist of further hikes ahead.

The index will also react to the ongoing UAW strike. Signs of it going on for longer will lead to more pressure on the main US indices. Many Nasdaq 100 constituents have links to the big 3 manufacturers.

Nasdaq 100 index forecast

Nasdaq 100 chart by TradingView

On the daily chart, we see that the tech-heavy Nasdaq 100 index has moved sideways in the past few days. Its attempt to recover after falling to a low of $14,563 on August 18th faltered at $15,600. The index remains above the 50-day and 25-day moving averages.

It is also attempting to form a double-top pattern at $15,934, the highest level on July 19th. Therefore, the outlook for the Nasdaq 100 index is neutral with a bearish bias. A move above the key resistance at $15,590 will lead to more gains to $15,934. 

On the other hand, a drop below the 25-day and 50-day moving averages will point to more downside to $14,563.

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