Nasdaq 100 Price Outlook:
Nasdaq 100 Forecast: Stock Leaders Take Backseat as Bond Yields Rise
US indices trickled lower to start the week, led by the technology sector and the Nasdaq 100. While technology stocks have been in vogue for months, the argument for a continued climb higher might face a new threat as bond yields begin the long road to recovery. Lackluster growth expectations, low inflation and even lower interest rates have kept yields low which has pushed many investors to take on considerable risk to generate returns. Now that yields have begun to creep higher, risk-reward relationships in the market may shift.
Nasdaq 100 Price Chart: 4 – Hour Time Frame (September 2020 – January 2021)
As a result, the high-flying Nasdaq may begin to encounter resistance on the path higher as investors weigh their options in other asset classes. That being said, the shift in fundamentals and market dynamics will likely play out over weeks and months, not mere trading sessions. Much like the rotation from technology to industrial stocks that has been a recurring theme over the last few months, rising yields may serve has a gradual force in the market – not a swift and sudden change.
Nasdaq 100 & US 10 Year Treasury Yield
With that in mind, there is little to suggest the Nasdaq 100 has reached its peak, but continued gains may become more difficult to establish if yields continue to rise – especially at the pace observed in November and December. Should equity weakness continue this week, early support might reside along the ascending trendlines from the November swing lows. Subsequent support might reside near 12,465. Follow @PeterHanksFX on Twitter for updates and analysis.
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–Written by Peter Hanks, Strategist for DailyFX.com
Contact and follow Peter on Twitter @PeterHanksFX