Nasdaq Technical Analysis: AI Momentum and Fed Rate Cut Hopes Drive Market Strength

The Nasdaq 100 continues to show positive traction this week and is consolidating near record levels. Investor sentiment remains upbeat despite Nvidia Corp. (NVDA)‘s results falling short of high expectations. Nvidia shares dropped after it removed China sales from its forecast. However, a 56% revenue jump confirmed that AI-related demand remains strong.

Strong gains in big tech helped lift the Nasdaq Index. Alphabet Inc. (GOOG) continues to reach new record levels and surge higher on strong demand, while Amazon.com (AMZN) and Broadcom Inc. (AVGO) are consolidating near record highs to stabilise recent gains. Nvidia’s results showed that AI growth remains solid despite a modest pullback. The market reaction confirmed that AI continues to drive the Nasdaq’s momentum.

Economic Data and Rate Cut Expectations Support the Rally

The economic data also supported the strong rally in US stocks. The chart below shows that initial jobless claims in the US dropped by 5,000 from the previous week’s high. Moreover, the claims dropped to 229,000 for the period ending August 23rd. This figure was slightly below market expectations of 230,000.

Additionally, corporate profits rebounded in Q2, alleviating concerns about a slowdown. Therefore, traders see over an 80% chance of a Fed rate cut in September. Furthermore, lighter trading volumes created smooth conditions for further gains, which pushed the Nasdaq to new highs.

Despite strong bullish momentum, the Nasdaq Index trimmed early losses on Friday after investors digested an in-line inflation report. The PCE index increased by 0.2% in July, in line with expectations. Moreover, annual inflation held steady at 2.6%, as shown in the chart below.

Core PCE also matched forecasts, rising 0.3% monthly and 2.9% year-over-year. These figures suggest inflation remains stable, keeping hopes alive for a Fed rate cut next month. Therefore, traders shifted their focus back to market fundamentals.

Liquidity Trends and Bitcoin Warning Signal

Strong financial liquidity continues to support equity markets. The Chicago Fed National Financial Conditions Index dropped to -0.56, its lowest level since the pandemic. This reflects loose monetary conditions, which typically encourage risk-taking in stocks. This liquidity helps sustain the bullish momentum in the Nasdaq.

However, Bitcoin (BTC) is flashing a caution signal. It is testing key support near 110K, and a breakdown could trigger a sharp correction. Bitcoin often acts as a leading indicator of investor sentiment.

The chart below shows that when Bitcoin drops, the Nasdaq 100 tends to follow. This connection suggests that if Bitcoin breaks lower, tech stocks may face renewed selling pressure.

Nasdaq 100 Technical Analysis

Nasdaq 100 Weekly – Resistance Test and Long-Term Bullish Setup

The weekly chart for the Nasdaq shows that the index is trading near a pivotal resistance level around the 23,900 region. This resistance is defined by the upper boundary of a broadening wedge pattern, suggesting the index may face a potential correction from this area.

However, the formation of a cup pattern and the emergence of strong buy signals since 2024 indicate that any pullback could present a buying opportunity for the next move higher.

Despite strong resistance in the Nasdaq, the weekly chart below shows that the index has already broken above the key 22,000 level. Therefore, any correction in this area may be considered a strong support region. Moreover, the 50-week and 200-week SMAs continue to support the bullish momentum in the stock index.

Nasdaq 100 Daily – Ascending Broadening Wedge and Inverted Head & Shoulders

The daily chart for the Nasdaq Index shows that it has formed an ascending broadening wedge pattern above the neckline of an inverted head and shoulders formation. The price is currently approaching the support of the broadening wedge.

Strong support lies near the 22,700 region. Any correction toward this level may be considered a buying opportunity. However, a break below 22,700 could trigger a deeper correction in the index.

Nasdaq 100 4-Hour – Ascending Channel

The 4-hour chart for the Nasdaq Index shows that it has been trading within an ascending channel and is now approaching the support line of that channel. If support holds at 23,300, a rebound toward higher levels may follow. However, a break below 23,000 could trigger a deeper correction.