Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
The Invesco QQQ ETF (QQQ), formerly known as the PowerShares QQQ, stands at a pivotal juncture in the financial landscape.
As the Federal Reserve announces its interest rate decision today, accompanied by the release of the FOMC Economic Projections, market watchers keenly anticipate signals regarding the economic trajectory. Inflation persists above the 2% target, resting at 3.6%, while a robust labour market underscores the situation.
Source: Trive – St. Louis Federal Reserve, Nkosilathi Dube
The QQQ recently reached an 18-month zenith, propelled by a surge in A.I. technology stocks. Its bedrock index, the Nasdaq, achieved an unprecedented first-half performance, boasting a nearly 40% ascent, largely fuelled by the enthusiasm surrounding Big Tech and A.I. innovations. However, with substantial economic data on the horizon, the QQQ’s momentum has tapered, witnessing two consecutive weeks of decline. The question now looms: What technical path lies ahead for this ETF amidst this dynamic economic landscape?
Technical
The QQQ has displayed a notable shift in its price dynamics after a sustained upward trend, surpassing the 100-day moving average. However, recent indicators suggest a waning momentum, with declining volumes and a dip in Relative Strength Index Conditions from overbought levels.
The daily chart reveals a discernible descending channel pattern, signalling a potential shift in market sentiment. A pivotal support level emerged at $335.19, propelling QQQ towards the channel’s upper boundary. Yet, downside momentum materialized, establishing resistance at $380.84, just below the $387.98 pivot point where initial pressures originated.
The QQQ now hovers at the critical 50% Fibonacci Retracement level, poised for potential sway by the impending interest rate decision. A breakthrough with substantial volume below this level might lead to a probable retest of $335.19, should the Federal Reserve lean towards further monetary tightening. Alternatively, tech enthusiasts might eye the $380.84 level as a potential pivot if momentum aligns in their favour.
Summary
With inflation above target and a resilient labour market, the Federal Reserve’s interest rate decision holds significant sway. Despite reaching an 18-month peak propelled by A.I. tech stocks, recent indicators suggest waning momentum. The 50% Fibonacci Retracement level is critical, poised for potential sway by the Fed’s decision. A breakthrough could lead to retesting $335.19, or tech enthusiasts may eye $380.84 if momentum aligns.
Sources: St. Louis Federal Reserve, CME, Reuters, TradingView
