US equities began the week with a modest performance as each of the major indices crept higher. The outperformer of the group, the Nasdaq 100, enjoyed a gain of 0.5% while the Dow Jones and S&P 500 were largely unchanged. Nevertheless, the Nasdaq has some catching up to do as it was the worst performer of the three indices over the last few weeks. Whether the reflation trade has met its end is yet to be seen, a trend that could be decided by the Federal Reserve’s interest rate decision later this week.

NASDAQ 100 PRICE OUTLOOK

In the meantime, the Nasdaq 100 and other markets may look to simply tread water ahead of the looming event risk. In the case of the Nasdaq, initial support might reside nearby along the descending trendline from the February high. Coupled with horizontal support drawn off recent lows, the levels could combine to offer some assistance around 12,730 if needed.

NASDAQ 100 PRICE CHART: 4 - HOUR TIME FRAME (NOVEMBER 2020 – MARCH 2021)

On the other hand, early resistance might exist near last week’s swing high of 13,120 with secondary, and more formidable, resistance likely taking shape around 13,360. While market participants may be hesitant to commit to a break out before the Fed meeting, the Nasdaq 100 might face another leg lower or an abrupt recovery rally in the days to come – depending on the Fed’s findings and tone.

As it stands, some investors fear the Fed will signal it is willing to slow its easing and raise rates sooner than expected – action that would likely not occur until mid-2022 at the earliest – a move that could undermine the Nasdaq 100, Dow Jones, and S&P 500 alike.

Should the Fed signal a willingness to maintain its current pace, risk assets might enjoy an extension higher as traders look to capitalize on the accommodative policy of the central bank. Alongside their expected policy path, the Fed will also release its first dot-plot of the year, offering their point of view on the economy and expected rates in the future.

Even if the Fed maintains course and verbally commits to its current path for months to come, unexpected findings on the dot-plot could rile market participants. Since forecasting exactly how the various Fed members view the current economic outlook is exceedingly difficult, it may be prudent to await the event risk and seek exposure thereafter as the market landscape could materially change in a single day.