After Tuesday’s drop, the markets stabilised on Wednesday in a quiet trade and now US equity futures are making a comeback attempt during the first half of Thursday’s session. This is despite continued weakness in China, where the government’s latest attempt to shore up the property market, failed to lift sentiment. The recovery has been driven by tech sector after results from Taiwan Semiconductor Manufacturing Co. helped to soothe investor sentiment hurt by a profit warning from Dutch chip equipment maker ASML on Tuesday, something which hit US chipmakers across the board. There were also reports of the US limiting advanced AI chip sales which had also sparked some concern, after Nvidia stock took a plunge on Tuesday. But judging by the price action in the futures market, it looks like dip buyers have once again swooped in as they have done all year, with Nvidia also making back its losses. Betting against the market has been costly in 2024, with almost every dip being quickly bought up. But with the US election just three weeks away, it could be a bumpy ride from here.For now, stock market investors are happy that central banks globally have been easing interest rates, with the European Central Bank set to cut by another 25 basis points today. While some of this has likely been priced in, the US presidential election looms large, and tight polls may drive some investors to take profits ahead of such a big risk event.
Nasdaq 100 Technical Analysis and Trade IdeasFrom a technical perspective, the Nasdaq 100 is still looking bullish and regardless of what we think might happen from a macro point of view, you have got to respect the charts and the trend. Until such a time there is a clear bearish reversal pattern on the chart, there is little point in trying to bet against the market. I will set out the scenario that could play out for the bears, though. As traders we have to be prepared for anything that could happen.If you take a glance at the daily chart, you’ll notice the index has been consistently making higher highs and higher lows since it bottomed out in early August, following the unwind of the yen-funded carry trade. Since then, the Nasdaq has reclaimed the 21-day exponential moving average and broken through a few key resistance levels, which have now flipped to support. All signs point to the path of least resistance being to the upside—for now, anyway. 
Key Levels to Watch
The bulls’ first line of defence sits around 20,285. The next key support is around the 19,900-20,025 area (shaded in green), which acted as support in the first week of October. At the moment, the bulls are targeting the next resistance zone between 20,465 and 20,685 (shaded in grey). This area was the point of origin of the breakdown back in July, and has now offered strong resistance on at least two occasions. This area now needs to break if we are to see a run towards the July peak of 20,759 in the coming days.However, as mentioned, we know that anything can happen at any moment. It’s crucial, therefore, to keep an eye on the charts for signs of a reversal. A break of key support levels could signal an opportunity to step aside or even go short if the trend shifts. It is also worth keeping an eye on other technical indicators on the Nasdaq and the major tech stocks like the VWAP indicator, especially if you are a day trader.
When to Get BearishIf the market reverses today for whatever reason and turns lower, then that could be the first sign of trouble, particularly after Tuesday’s bearish close. This would imply the bulls, who bought the dip on Wednesday, are now getting stuck. But for me, a clearer sign of a reversal would be if that 19,900-20,025 gives way in the coming days, for then we will have formed our first lower low since the markets bottomed in August. A breakdown here could open the door for a deeper correction, possibly sending the index down toward the 200-day moving average.But let’s not jump the gun. For now, it’s all about watching those key support levels and seeing if the bulls can keep control of the market. If they do, the uptrend remains intact. If not, we now know exactly what to look for.
QQQ gives exposure to the Nasdaq 100?If you can’t trade index futures or derivatives, then consider an exchange traded fund (ETF) such as QQQ, which is an index fund offered by Invesco that mimics the returns of the Nasdaq 100 index.
Final thoughtsWhile the Nasdaq 100 has had an impressive run, caution is key as we head toward the US election. The bulls are still in control, but a sharp reversal is always possible. Keep an eye on key support levels, manage your risk, and be prepared for a shift in trend. For now, we remain cautiously optimistic, but in trading, anything can happen.More By This Author:What Is Gold’s Recent Consolidation Telling Us? EUR/USD Faces Continued Downside Risk Ahead Of US CPIS&P 500: Stocks ease ahead of US jobs and amid raised geopolitical risks
