Week Ahead: NAS100 upside braced for major test

• NAS100 up 6% YTD

• Nvidia earnings could jolt index

• Keep eye on Fed minutes

• Prices firmly bullish but RSI overbought

• Key level of interest at 18000

Despite the holiday shortened week ahead in the United States, be prepared for extreme levels of volatility on the NAS100.

It will be a pivotal trading week for the index as focus falls on Nvidia’s earnings and the Fed meeting minutes:

Monday, 19th February

• US markets closed - Presidents’ Day holiday
• China markets reopen after Lunar Year holidays

Tuesday, 20th February

• CNH: China loan prime rates
• AUD: RBA meeting minutes
• CAD: Canada CPI
• US30: Walmart earnings
• UK100: Barclays earnings

Wednesday, 21st February

• EUR: Eurozone consumer confidence
• USD: Fed meeting minutes, Atlanta Fed President Raphael Bostic speech
• NAS100: Nvidia earnings
• UK100: HSBC earnings

Thursday, 22nd February

• CAD: Canada retail sales
• EUR: ECB meeting minutes, CPI report, Eurozone/Germany PMI’s
• GBP: UK S&P Global/CIPS Manufacturing PMI
• USD: Fed Governor Lisa Cook, Minneapolis Fed President Neel Kashkari speech

Friday, 23rd February

• EUR: Germany IFO Business climate, Germany Q4 GDP (final)

The NAS100, which tracks the benchmark Nasdaq100 index has gained 6% year-to-date thanks to strong corporate earnings and of course the A.I. mania.

After breaching 18,000 for the first time, the question is whether bulls have enough fuel to push prices even higher.

Watch out for these 3 key factors:

1. Nvidia earnings

All eyes will be on Nvidia’s latest quarterly earnings after US markets close on Wednesday, Jan 21st.

For a company that has been turbocharged by the A.I. hype, investors will be looking for exceptional earnings that would justify the jaw-dropping gains.

To put things into context, Nvidia stocks have rallied over 46% year-to-date recently eclipsing the likes of Alphabet and Amazon in market capitalization as the chip giant’s rally maintains momentum.

Essentially, the bar has been set quite high for Nvidia with very little room for disappointment.

The AI chip giant expected to post earnings of $4.58 a share, and a rise in quarterly revenue to $20.3 billion from $6.1 billion a year ago.

What does this mean for the NAS100?

Well, considering how Nvidia has one of the biggest weightings on the Nasdaq 100, how the stock reacts to the earnings will most likely influence the index.

• Should Nvidia's earnings satisfy investors’ lofty expectations and paint a very encouraging business outlook, this could push the NAS100 higher.

• If Nvidia's earnings disappoints in the slightest, this could trigger an aggressive selloff in the NAS100.

2. Fed meeting minutes

Before Nvidia’s earnings, the minutes of the January FOMC meeting will be in focus on Wednesday evening.

The minutes may provide insight into why Fed officials remained hesitant to cut interest rates in March despite signs of cooling price pressures before the meeting. There may also be additional clues on rate cut timings in 2024.

It is worth noting that much has changed since the January meeting, with the recent sticky inflation figures slashing expectations around early Fed rate cuts. 

Traders are currently pricing in a 41% probability of a 25-basis point Fed cut by May with a cut fully priced in by June, according to Fed Fund futures.

• The NAS100 may edge higher if the minutes strike a more dovish note.

• Should the Fed minutes sound more hawkish than expected, the NAS100 could edge lower.

3. Technical forces

The NAS100 is firmly bullish on the daily timeframe with prices trading firmly above the 50, 100, and 200-day SMA. However, the Relative Strength Index (RSI) signals that prices are flirting around heavily overbought levels.

• A solid weekly close above the 18000 level may open a path to the next psychological round level at 18500.​​​​​​​

• Should 18000 prove to be a tough nut to crack, this could encourage a decline back towards the 17500 higher low and 17150.