THE Nasdaq-100 Index performance has been stellar in 2024, rising 20.25 per cent as at Oct 24, reaching 20,232.87 points. Although slightly below its July peak, the index has remained strong.
However, its performance in the third quarter of 2024 reflected a sharp correction and subsequent rebound, driven by US economic indicators suggesting inflation may persist.
Investors have also been reassessing strategies, particularly those involving yen carry trades, as Japan’s central bank raised interest rates, strengthening the currency.
This, combined with the US Federal Reserve’s 50-basis-point rate cut, has bolstered confidence in the Fed’s approach to tackling the slowing economy.
However, the Fed faces a delicate balancing act, controlling inflation while avoiding the risk of being perceived as slow to lower interest rates, which could potentially lead to a recession.
Looking ahead to Q4 2024, in addition to the anticipated further rate cuts by the Fed, the US presidential election will be a key focal point, potentially causing market uncertainty due to the disparity in the expected policy directions of the two presidential candidates.
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Bullish scenario
Since rebounding in August, the Nasdaq has maintained its bullish momentum, remaining above its uptrend line.
In the short term, this momentum is likely to stay intact if the index stays above the 20,000 level, with additional support from the 20-day simple moving average (SMA) around 20,125.
On the upside, the index is expected to encounter resistance at 20,500, and the year high of 20,690.
Should the index break above the 20,690 level, the bullish momentum is likely to continue further into Q4 2024, with the potential to reach new highs.
Bearish scenario
However, signs of weakening bullish momentum have emerged, with more selling pressure appearing, particularly apparent in the long candles on the daily chart.
Should the index break below the uptrend line, the next support levels would be at the 76.4 per cent Fibonacci retracement level of 19,510, followed by the 61.8 per cent Fibonacci level and the 200-day SMA around 18,800.
While a short-term correction could occur with the weakening bullish momentum, the long-term uptrend remains likely to continue, provided the index stays above the 50 per cent Fibonacci level at 18,200.
This strong support zone could lead to a consolidation phase, with range-bound movement expected between the 18,200 and 20,600 levels over the next three to six months.
The writer is manager (dealing and investor education) at Phillip Securities
