Fundamental Overview

The Nasdaq is currently trading at levels last seen in May. For four months, the index has remained largely rangebound amid elevated volatility. The two main drivers of this underperformance are Federal Reserve tightening risks and the US-Iran war, both of which act as negative forces on future growth.

The difficulty is that these negative factors emerged when market positioning was heavily lopsided. Technology stocks, particularly semiconductors, were the most crowded trades on record. That crowding matters because heavily concentrated positioning amplifies moves when sentiment shifts: as traders unwind the same positions at once, selling begets selling. As macro conditions shifted, deleveraging has begun across the board.

Rate expectations weigh especially heavily on the Nasdaq because its index is dominated by technology names whose valuations rest heavily on future earnings growth; higher rates raise the discount applied to those distant cash flows, making the sector more sensitive to Fed policy than the broader market.

The latest push lower was triggered by a hawkish speech from Fed Chair Warsh, which retightened financial conditions and produced a hawkish repricing of interest rate expectations. The probability of a rate hike in September jumped from 33% to 60%.

Warsh also reiterated that the Fed is focused solely on inflation for now and noted that progress has been slow. On that basis, only a soft US CPI report appears capable of pulling the probabilities back below 50% and deterring the Fed from hiking at the upcoming meeting.

If the probabilities remain at or above 50%, the Fed could be compelled to hike regardless, since failing to do so would send a dovish message and ease financial conditions once again.

For now, upside in the Nasdaq remains limited by hawkish rate expectations and the escalation of the US-Iran war. The best-case scenario would pair a soft US CPI print with a de-escalation in the Middle East. The worst-case scenario, by contrast, would be a hot CPI without de-escalation, which could send the market back toward the lows seen in July. For markets, the Middle East conflict matters chiefly through its potential to disrupt energy supply and push oil prices higher, a channel that feeds directly into the inflation the Fed is trying to fight.

Nasdaq Technical Analysis – Daily Timeframe

On the daily chart, the Nasdaq found support around the 28,950 level. If price pulls back into that support again, buyers can be expected to step in with defined risk below the support to position for a rally toward the all-time highs. Sellers, meanwhile, will want to see a break lower in order to pile in for a drop toward the July low around the 27,200 level.

Nasdaq Technical Analysis – 4 Hour Timeframe

On the 4-hour chart, a clear range is in place between the 28,950 support and the 29,800 resistance. Market participants will likely keep playing the range by buying at support and selling at resistance until a breakout occurs on either side.

Nasdaq Technical Analysis – 1 Hour Timeframe

On the 1-hour chart, a downward trendline defines the bearish momentum in place since Warsh's hawkish speech, while an upward trendline defines the recent pullback. Buyers will likely continue to lean on the upward trendline to keep pushing toward the resistance, while sellers will look for a rejection around the downward trendline and a break below the upward one to target a drop through the support. The red lines define the average daily range for today.

Upcoming Catalysts

Today brings remarks from Fed's Waller, US Jobless Claims data, and the US ISM Services PMI. Tomorrow concludes the week with the US Non-Farm Payrolls (NFP) report. Together with the upcoming CPI release, these data points will shape whether rate-hike probabilities — and with them the Nasdaq's range — shift decisively in either direction.