S&P 500, Nasdaq 100 Price Outlook for The Week Ahead

All speculation that the Fed will lower the rate of interest rate increases has now been put on hold as the central bank continues to aim for persistently high inflation in the wake of Friday's labor report. The most recent NFP data, which shows the US employment market in excellent condition, refutes recent rumors that the Fed may change course on interest rates in response to a slowing economy.

The Fed will have greater freedom to raise rates higher and quicker thanks to today's publication, but it is just one piece of information. Although the Fed uses semantics to claim that everything is OK, a study at the US Treasury market reveals that the UST2s/10s curve is inverting even further, presently at a level of roughly -40bps. Data releases are still crucial, as usual, and Fed talk also has to be carefully monitored.

Next week, all eyes will be on the inflation data released on Wednesday, with another little increase in core inflation predicted. However, if this data reveals dropping inflation, it would encourage ideas of a "soft landing" in the US, giving the Federal Reserve its ideal situation.

The Nasdaq 100's latest rise tried and failed to breach trend resistance off the high from late December 2021. The tech-heavy indexes have been on the rise recently, rising more than 20% from their low on June 16. Trading may soon go back to the "sell the rise" habit that has worked them so well since the end of 2021 as the current "buy the decline" mentality during the previous six weeks seems to be done for the time being.

AUGUST 5, 2022: NASDAQ 100 DAILY PRICE CHART

In addition, the S&P 500 rise has been stopped after reaching a new two-month high this week. While the S&P 500 will continue to be under pressure, the downside for the indices will probably be more constrained than the tech-heavy Nasdaq. The indexes have made a series of higher lows over the last 6 to 8 weeks.

August 5, 2022 in the S&P 500 Daily Price Chart

According to statistics from retail traders, 1.66 traders for every 1 short trader shows a net long position of 37.63 percent. While the number of traders who are net-long is up 3.09 percent from yesterday and down 0.15 percent from the previous week, the number of traders who are net-short is up 0.77 percent from yesterday and up 17.15 percent.

We often adopt a contrarian stance to the general consensus, and the fact that traders are net-short means that US 500 prices may climb in the future.

Positioning is more net-short from last week than it was yesterday. We have a further mixed US 500 trade bias based on the current mood and previous adjustments