Nasdaq 100 Index: Morgan Stanley Sees A Moment Of Reckoning

The Nasdaq 100 index continued its bullish rally as risks to the American economy eased. The tech-heavy index surged to a high of $14,557, the highest level since April last year. In all, the index has surged by more than 39% from the lowest level in 2022. 



Morgan Stanley is unconvinced

US equities have surged recently, helped by big-tech companies like Nvidia, AMD, Apple, and Amazon which have jumped this year. In fact, excluding the biggest tech companies in the US, the S&P 500 index is actually negative for the year.

There are three main reasons why the Nasdaq 100 (NDXNDX, QQQ) index has surged. First, the artificial intelligence hype machine has pushed most stocks sharply higher. For example, as I wrote in this articleNvidia shares surged, pushing its market cap to over $1 trillion. Other companies providing AI solutions like Microsoft and Alphabet have also done well.

Second, the index is cheering the likely pause of the Federal Reserve. In a statement last week, the new Fed vice chairman said that he was supportive of a pause in June. He argued that the pause will help the bank assess the impact of the past rate hikes. 

Finally, the Nasdaq 100 index reacted to the debt ceiling deal passed last week. The deal will see the US avoid an unprecedented default that would have crashed US equities.

Despite the surge, analysts at Morgan Stanley (MS) are still bearish on US equities. In a statement, the bank said that the company’s earnings will continue disappointing in the near term. The report said:


“While a deteriorating liquidity backdrop is likely to put downward pressure on equity valuations over the next three months, we also see EPS disappointment ahead as revenue growth slows and margins contract further.”


Nasdaq 100 index forecast

Nasdaq 100

On the daily chart, we see that the Nasdaq 100 index has been in a strong bullish trend in the past few days. The index has jumped above the important resistance level at $13,697, the highest point on August 12. It was also the upper side of the ascending triangle pattern. Further, the Nasdaq index has moved above the 50-day moving average while the MACD has moved above the neutral point.

The momentum indicator has moved above 1. Therefore, the index will likely continue soaring as buyers target the next resistance at $15,320, the highest point on March 28.

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