- The Nasdaq 100 index (US100) closed at its highest level in 14 months, with a gain of over 1%.
- Recent rally is fueled by AI boom and easing CPI data
- Nasdaq 100 is only 9% from historical ATH during post-pandemic rally
The Nasdaq index is experiencing a significant gains, reaching its highest level in 14 months. This rise is primarily driven by the hype surrounding AI technology, further fueled by speculation that the Federal Reserve is nearing the end of its rate-hiking cycle. Despite Federal Reserve Chairman Jerome Powell explicitly stating that this is merely a "hawkish pause," investors seem to interpret the situation differently and are questioning the Fed's increased projections. AI companies have seen exceptional returns, bolstered by higher analyst recommendations regarding their valuations. Yesterday's significant gains were led by major tech companies such as Microsoft (+3.2%), Meta (+3.10%), and Autodesk (+3.70%).
The chart above shows the annual returns of the Nasdaq100 (US100) starting from 1998. As it stands, the current year is the best performing of all, with a robust gain of nearly 40%. It's noteworthy that the index experienced a significant decline in the previous year and began its growth trajectory almost at the start of this year. Even if we extrapolate the current gains to the end of the year, the returns would rank among the top 5 years in the last 25 years analyzed.
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US100 index, currently trading at 15354 points, has shown strong bullish momentum by breaking a significant resistance level at 15220 points seamlessly. This upward movement also led to a break above the upward trending channel, indicating a potential continuation of the bullish trend. The next significant resistance level is around 15654 points. However, traders should be cautious as the recent rally may trigger profit-taking activities. In that case the index may decline to the last consolidation zone between 14500-14600 points.
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