Nasdaq 100 (US Tech) Analysis

• Historically, March presents a tricky month for the Nasdaq in an election year but tends to witness impressive full year gains
• Nasdaq posts a slow start to the week ahead of economic data
• Major risk events in the week that lies ahead: services PMI, Fed talk and NFP
• The analysis in this article makes use of chart patterns and key support and resistance levels. For more information visit our comprehensive education library

March Madness: Nasdaq Tends to Underperform in March During Election Years

With the presidential race well under way, it may be useful to see how the tech-heavy Nasdaq has performed in March in prior election years when the incumbent president was up for reelection. The data does not make for good reading as March typically represents the second worst month of the year (ranking 11th out of 12 months) and sees an average decline of 1.6% for the month, according to data going back to 1950.

Source: Data courtesy of @AlmanacTrader, table recreated by Richard Snow

Nasdaq posts a slow start to the week ahead of key economic data

The Nvidia hype has propelled the Nasdaq higher at the start of a month that has historically proved to be a drag on the index in prior election years. While prior data may be insightful, the first point of consideration should always be price action.

The index has provided short-lived pullbacks which served as opportunities to reenter the bullish trend. Last week, price action broke and closed above the prior zone of resistance around 18,100. The 50-day simple moving average (SMA) has lagged behind bullish price action but has provided a dynamic support as the bullish trend continues.

18,100 remains relevant in the event a short-term pullback transpires, especially after Apple was handed with a $2-billion fine over anti-trust breaches in the EU. Momentum appears well intact as the MACD indicator trades above zero while the RSI flirts with overbought territory.

Nasdaq Daily Chart (US Tech 100)

Source: TradingView, prepared by Richard Snow

Major Risk Events in the Week Ahead

This week there is a notable amount of Fed communication, as officials provide their takes on the US economy before the media blackout commencing this Saturday. Amongst the speakers is Jerome Powell as he prepares to testify in front of congress on Wednesday and Thursday. Economic data has been strong in general, but Friday’s US manufacturing data provided a potential sign of concern due to the lower move in the ‘new orders’ sub-index. New orders are typically seen as a forward-looking indicator which will likely shift the focus to tomorrow’s services PMI data for confirmation.

Then, on Friday, US non-farm payroll data is expected to show an addition of 200,000 jobs having been added in February – which would add to the recent trend of strong jobs data. The unemployment rate is also expected to hold firm at 3.7%, well below the theoretical natural rate of unemployment which is said to be around 4.4%.

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