NQ100_m hits new 2023 high! What’s next?

The NQ100_m came within a touch of the 16,000 mark yesterday (Wednesday, 15 November).

Though this tech-heavy index still managed to print a new year-to-date high at 15,993.8, traders shied away from actually reaching that psychologically-important 16k level.

Recent gains may have deemed to have gone too far too fast, at least for now.

Beyond the round-number impact around the 16k mark, the NQ100_m may also have seen a technical pullback as its 14-day relative strength index (RSI) also flirts with the 70 mark which is the textbook label for “overbought” conditions.

The last time that the NQ100_m index reached such overbought levels preceded declines that went on for 3 months.

The NQ100_m may also be waiting for US weekly initial jobless claims data due later today (Thursday, November 16th) before making their next move.

A higher-than-220k US weekly initial jobless claims figure today could re-launch a bid for the 16,000 handle.

Still, the price action over the past few weeks marks a remarkable turnaround for the Nasdaq 100 index, which had suffered a 33% decline in 2022.

Why has the NQ100_m rebounded?

• Start of 2023 – 18th July: the mania surrounding artificial intelligence had sparked a 44.8% surge for this tech-heavy index
   
• 18th July – 27th October: US Treasury yields soared as concerns crept in that the Federal Reserve may actually trigger more rate hikes, which in turn dragged the NQ100_m 10.5% lower
   
• 27th October – present: the Nasdaq 100 climbed by 11.5% to post a new intraday high for the year, after the US unemployment ticked higher while the October consumer price index (CPI) came in below market expectations.

The latest jobs and inflation data showed that the Fed’s aggressive rate hikes are taking hold in the world’s largest economy, and should negate the need for more rate hikes.

Can NQ100_m post a new record high before 2023 is over?

Note that, as of yesterday’s US market close, the benchmark Nasdaq 100 index (tracked by the NQ100_m) is merely 4.56% below its all time high posted almost exactly 2 years ago, on 19 November 2021.

Here are 3 things that might need to happen in order for the once-unthinkable to become reality (a fresh record high for the Nasdaq 100 by end-2023):

1) Nvidia has to post better-than-expected earnings and sound bullish on its future earnings

Nvidia has been the best-performing member of the Nasdaq 100 index so far this year, boasting a year-to-date advance of 234.5% at the time of writing.

The US chipmaker is due to release its latest quarterly earnings on 21 November.

If Nvidia can deliver a positive surprise next week, showing that the AI-mania is indeed still boosting the chipmaker’s earnings, this stock could move by over 7% higher.

And given its sheer size and weight (market cap of US$ 1.2 trillion), positive surprises out of Nvidia’s latest quarterly financial performance and its earnings outlook may well set the NQ100_m on a path towards a fresh peak.

2) US economic data must nullify risk of inflation resurgence

Markets will be paying close attention to the upcoming US jobs report and inflation data releases.

The next US nonfarm payrolls report is due on December 8th.

The November US consumer price index (CPI) will be released on December 12th.

If both sets of economic data continue to show softening inflationary pressures, which keeps the door shut on yet another Fed rate hike while potentially hastening a US rate cut in 2024, either one of these data releases could spark further gains for the NQ100_m.

3) Fed has to affirm market expectations for no further rate hikes

Markets currently predict no more Fed rate hikes, with a 75% chance that a US rate cut will happen in May 2024.

Such expectations are framing the Federal Reserve’s final policy meeting of the year on December 12th-13th.

If Fed Chair Jerome Powell and his fellow FOMC colleagues push back against such hopes, that may delay the posting of a new record high for the Nasdaq 100 index.

Interestingly, the Nasdaq 100 index is expected to hit 17437.64 within 12 months from now, suggesting a 10.2% upside.

And that's based on Wall Street analysts' forecasts for constituents within the index.

Amid such expectations, it may only be a matter of time before the NQ100_m posts a fresh record high.

And if the 3 events listed above play into the hands of NQ100_m bulls (those hoping prices will go higher), that new peak may arrive sooner rather than later.