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Nasdaq 100 Poised for New Highs Again: Look to Buy Any Potential Dips

Published 06/06/2024, 06:35 PM

US index futures edged higher following Wednesday’s latest upsurge to new record highs, indicating another all-time peak for the major indexes when cash markets open. Investors will be watching to see how much further might Nvidia (NASDAQ:NVDA) rise after it became the first computer chip company to reach the $3 trillion milestone.

Thanks to the tech rally, several stocks in the sector such as Amazon (NASDAQ:AMZN), Advanced Micro Devices (NASDAQ:AMD) and Apple (NASDAQ:AAPL) have all formed bullish-looking price action to suggest more gains could be on the way – in particular for the iPhone maker.

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Why did the markets hit new highs?

The S&P 500 and Nasdaq 100 both closed at record highs following another surge in Nvidia shares to unchartered territories on Wednesday. The sharp rally more than wiped the losses from the week before, when markets looked like they had formed a temporary top, when yields were on the rise amid concerns about high interest rates remaining in place for longer.

But yet again, the bears were overwhelmed by the bulls as bond yields eased back down following some disappointing US macro data in the early parts of the week, which helped lower expectations about interest rates remaining high for longer. But on Thursday, the good news was also good news as traders took the ISM Services PMI beat in their stride, instead concentrating on yet another bullish breakout in Nvidia stock, which topped an eye-watering $3 trillion in market capitalization.

What will traders be watching today?

The renewed tech optimism coincides with growing confidence among investors that central banks across the developed world will be able to ease monetary policy this year. The Bank of Canada kicked off its cutting cycle and hinted at more easing to come. Traders have also started to price more Federal Reserve easing this year following the weak ISM manufacturing PMI on Monday, and some labor market softening signs.

Thanks to some weakening US data (until Wednesday’s release of ISM services PMI), market consensus has swung towards more interest-rate cuts this year, but that could easily change again. In Europe, wages have remained higher than expected and this may prevent the ECB from cutting rates again.

Nvidia, Apple among tech stocks to watch

Nvidia shares have rallied almost 150% this year, as the insatiable demand for its chips used to power artificial intelligence tasks skyrockets. On Wednesday, its market value rose more than $3 trillion after a 5% surge in shares, overtaking Apple to become the second most valuable company in the world behind Microsoft (NASDAQ:MSFT). Can Nvidia claim the number one spot in this category?

As well as Nvidia, it is worth keeping a close eye on Apple stock, which until recently had been in the negative territory for the year amid concerns over cooling iPhone demand in China and a fine from the European Union. But the stock has found love in recent weeks and could be heading to a new all-time high soon.

If it does, the next question will be can it hold the potential breakout this time? Since July last year, Apple has repeatedly failed to break through the $195-$200 resistance range, making an all-time high of $199.62 in December, before its multi-month slump. But now it is at this key resistance zone after the latest tech optimism. Can it break through that $195-$200 resistance range finally, or will we see another bearish reversal here?

Nvidia, Apple Charts

Given the size of these stocks any reversal for Nvidia and/or Apple should not be taken lightly when it comes to trading index futures or index ETFs such as QQQ or SPY.

QQQ technical analysis and trade ideas

As tech stocks surged, the popular QQQ, which tracks the underlying Nasdaq 100 index, closed at a record high on Wednesday. It broke above former resistance and the 127.2% Fibonacci extension of the last significant downswing in March, at around the 460.00 area or more specifically between 459.21 and 460.58.

QQQ Daily Chart

Given Wednesday’s clean break out, this area is now going to be the first short-term support zone to watch on any dips, which could get defended. Below this area, the base of this week's breakout at around 455.00 is the next key level of support.

Any potential move below that 455.00 level would put the bulls in a spot of bother, and more so if we go below the March high of 449.34, now the key support to watch.

However, for things to turn bearish, we will still need to see some confirmation, such as a breakdown of the bullish channel or the formation of a lower low – with the most recent low coming in at 443.06. Such a scenario could then pave the way for a deeper correction that may last for several days, as the bulls rush for the exits.

That being said, the trend is clearly bullish, and buying the dips remain the preferred strategy. This has been highlighted by QQQ mostly sticking around its 21-day exponential moving average, which is a key short term trend indicator. As traders, fighting the trend as strong as this doesn’t make any sense without confirmation or unless done so selectively in the right moments.


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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple points of view and is highly risky and therefore, any investment decision and the associated risk remains with the investor.

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