- Fed Chair Powell’s “inflation is transitory” induced rally in US stocks may be temporary.
- Market breadth remains weak in the Nasdaq 100.
- Watch the 20,340/790 key medium-term resistance on the Nasdaq 100, where it may spark another impulsive down move sequence.
This is a follow-up analysis of our prior report, “Nasdaq 100 Outlook: Bulls got spooked by stagflation fears” dated 24 February 2025.
Since our last publication, the Nasdaq 100’s price action has tumbled as expected. It shed by 13.8% from its current intraday all-time high of 22,223 on 19 February to hit an intraday low of 19,153 on 13 March.
The four-week down movement of the Nasdaq 100 has transformed into a medium-term bearish trend as it has breached and traded below its key 200-day moving average since 6 March.
The current bout of weakness has been attributed to looming economic growth sluggishness, heightened imported inflationary pressures from the current US White House’s erratic and aggressive trade tariffs policy coupled with competition from Chinese Artificial Intelligence (AI) equities related theme play.
Fed’s Chair Powell Downplayed the Stagflation Fears
At the Wednesday,19 March FOMC meeting, the Fed maintained its Fed funds rate at 4.25%-4.50% as expected, but in its latest “dot-plot” of economic projections, it revised its GDP growth forecasts downwards (1.7% vs. prior 2.1%) and increased its revisions to core PCE inflation (2.8% vs. prior 2.5% and unemployment rate (4.4% vs. prior 4.3%) projections for 2025.
Fed Chair Powell, in his press conference, stated that the base case remains for tariffs to have a transitory impact on inflation that sparked a rally across the major US stock indices that erased all losses seen on Tuesday, sparking a best “Fed Day” rally since July 2024 where the Nasdaq 100 advanced by 1.3%.
Market Breadth Remains Weak on the Nasdaq 100
Fig 1: Nasdaq 100 CFD major & medium-term trends as of 21 Mar 2025 (Source: TradingView)
In the lens of technical analysis, the ongoing rebound of the Nasdaq 100 CFD Index (a proxy of Nasdaq 100 E-mini futures) where it has gained by 4.4% from its 11 March low of 19,125 is likely to be a minor corrective rebound sequence within a medium-term downtrend phase that remains intact since its 19 February high (see Fig 1).
One of its market breadth gauges continues to trend in a lacklustre fashion, the five-day moving average of Nasdaq 100 component stocks hitting new 52-week highs less 52-week lows are still below zero (-0.80 as of 20 March).
Watch the 20,340/790 key medium-term pivotal resistance, and a break below 19,125 intermediate support may trigger another leg of impulsive down move sequence to expose the next medium-term supports at 18.130 and 17,300/250.
On the flip side, a clearance above 20,790 invalidates the bearish scenario to spark a new potential medium-term bullish trend for the next medium-term resistances to come in at 21,440 and 22,470/980.