Inflation has once again proven to be a hot topic following the PCE Index report, which revealed that prices have strengthened for two months back to back, up 0.6% in January and 0.2% in December.  

Inflationary pressures have induced weakness in equities as the U.S. Dollar and U.S. Bonds have become more attractive capital destinations. Nasdaq 100 futures (CME: NQ) plunged 3.32% last week as hawkishness was restored with bets on further Federal Reserve rate hikes. 

Technical 

Nasdaq 100 futures uptrend stalled following a breakdown below the upward-sloping trendline and the 100 Moving average. Support and resistance were formed at the 11919.50 and 12257.00 levels, respectively. 

Bullish traders will look to the 12257.00 level with interest if they attempt to undo some of the bear’s work from the prior week. A bullish case could be supported by a breakout above the current consolidation zone’s resistance at the 12040.75 level with higher volumes.  

Alternatively, the 11919.50 level could interest bears if they ride on the back of hawkish sentiments. A breakout below the level on high volumes could be a sign of bears preparing for another leg down, making the 11626.50 level a potential take-profit level for a bear case.  

Summary 

The principal factors affecting the Nasdaq 100 futures this week will be the Purchasing Managers Index (PMI) and the Labour Market reports. If the PMI and Labour Market reports point to a resilient U.S. Economy, it could pave the way for more bearish price action as hawks continue to dominate the market. The 11919.50 level will likely act as a magnet for bears.  

Sources: Reuters, TradingView