The Nasdaq Composite is maintaining its upward trend with few bearish influences and positive growth impulses. Recent lower-than-expected US inflation figures and robust US activity data are supporting this trend without concerning inflation developments.
An upcoming August 1 tariff deadline may create some defensive market behaviour, but past experiences suggest that outcomes could be positive. Potential risks include tariff-induced growth scares or changes in interest rate expectations. However, if the Federal Reserve opts to wait or cut rates, the market may continue its upward movement.
Nasdaq’s Daily Chart Analysis
The daily chart shows the Nasdaq Composite consistently reaching all-time highs due to the lack of bearish influences. Buyers have favourable risk-to-reward ratios around previous highs at 20,202, complemented by a trendline. Sellers would seek a price break below this to consider increasing bearish investments towards 19,200.
On the 4-hour chart, prices are within a rising channel. Buyers utilise the channel’s lower bound to aim for new highs, while sellers target the upper bound for potential breaks downward to 20,202. Similarly, the 1-hour chart indicates buyers are likely to continue capitalising on the lower bound for new highs, while sellers anticipate breaks for pullbacks.
Upcoming US Jobless Claims and Flash US PMIs data will provide further economic insights.
Given the upward bias, we see opportunities in strategies that profit from rising prices, like buying call options or selling put spreads. The Nasdaq 100’s gain of over 20% year-to-date is fueled by conditions like the recent core PCE inflation rate holding steady at 2.6%, easing concerns of aggressive rate hikes. This environment validates taking on calculated bullish risk.
Economic Signals and Strategy
Strong economic signals, such as the recent S&P Global Flash US Composite PMI hitting a 26-month high of 54.6, support this positive momentum. Therefore, we would view any pullback towards the 20,202 support level as a chance to initiate or add to bullish positions. Selling cash-secured puts at or below this level could be an effective way to collect premium while setting a favorable entry point.
The primary risk on the horizon remains the August 1 tariff deadline, which could introduce volatility, especially with Mr. Trump’s unpredictable policy shifts. To hedge against a potential growth scare from this event, traders could consider buying short-dated put options as a form of insurance. This strategy provides downside protection without forcing the liquidation of core bullish holdings.
In the bigger picture, the Federal Reserve’s dovish lean provides a significant backstop for the market. Historically, periods following a Fed pivot to a more accommodative stance, like we saw in 2019, have been highly favorable for growth-oriented assets. This precedent suggests that even if rate-hike fears or tariff shocks cause temporary dips, they are likely to be buying opportunities.
The index is currently trading within a well-defined rising channel, presenting clear boundaries for traders. We can use this pattern to structure trades like bull call spreads, buying calls near the channel’s lower bound to play for a bounce. Conversely, if the price approaches the upper bound, it may be prudent to take some profits or hedge, as sellers have historically become more active there.
