By Samir Al Khoury

The Nasdaq 100 index reached a recent high of 16,056 points just two days ago, marking its peak since January 5, 2022, only to retract and close at 15,933 points yesterday—hovering below the psychological threshold of 16,000 points. Despite three attempts this year to breach the 16,000-point mark, the index appears to face formidable resistance at this level. The key challenge ahead is breaking through this barrier to achieve new record levels.

The positive momentum in technology stocks is evident, with the Nasdaq 100 index experiencing a notable 14% increase in the past four weeks (from October 26, 2023, to yesterday’s close). Year-to-date performance reflects an impressive 47% surge, primarily attributed to the stellar performance of the seven leading stocks within the index, collectively known as the “MAGNIFICENT 7.”

The outstanding individual performances of these stocks from the beginning of the year until yesterday’s close are as follows:

1- Nvidia shares recorded an increase of approximately 253%

2- Meta stock recorded an increase of approximately 172%

3- Tesla shares recorded an increase of approximately 125%

4- Amazon shares recorded an increase of approximately 68%

5- Microsoft stock recorded an increase of approximately 55%

6- Apple shares recorded an increase of approximately 53%

7- Alphabet stock recorded an increase of approximately 54%

While these figures are remarkable, the pressing question arises: Can the upward momentum of these seven stocks be sustained, and for how long?

Several factors contribute to the positive momentum in U.S. stocks overall:

• Seasonality: November and December are traditionally favoUrable months, often referred to as the “Santa Claus Rally.”
• Anticipation of Interest Rate Cuts: Discussions about lowering interest rates starting in the first half of the next year.
• Positive Economic Data: Favourable economic indicators for stock markets, including a slowdown in consumer and producer price indices.

The critical question remains: When will the first interest rate cut occur, and what will be its magnitude and pace?

In this scenario, the financial markets have already factored in the likelihood of an interest rate cut, with a probability of around 28% in March and approximately 60% in May of the coming year. Interestingly, these expectations have emerged despite no explicit mention of interest rate reduction by U.S. policymakers, as revealed in the recently released minutes of the Federal Open Market Committee meeting.

It’s emphasised that any future decisions to increase interest rates will hinge on a comprehensive evaluation of the overall data. The Federal Reserve remains cautious, requiring more evidence that inflation is on a trajectory toward the target of 2%.

From a technical perspective, the Nasdaq 100 is exhibiting an upward trend, notably with the 20-day moving average positioned above the 50-day moving average—a positive indicator for the index. Furthermore, the Relative Strength Index is at 69 points, indicating an overbought condition and suggesting positive momentum for the Nasdaq 100.

Examining the MACD indicator, the blue line has crossed upward with the orange SIGNAL LINE, a positive signal for the Nasdaq 100 index.

Please note that this analysis is provided for informational purposes only and should not be considered as investment advice.

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