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Markets rallied strongly after solid earnings especially in the technology sectors (see earnings summary attached). Now that most companies have reported the market, the next FOMC meeting on March 15th could be the next event to attract investor’s attention. The probability of a hike in March implied in the fed fund futures is roughly at 25%, which seems rather low. Latest non-farm payroll were released at 227k vs 175k expected, and unemployment level remains not far from full employment below 5%. Most importantly both headline and core consumer price indices are close to the 2% target. Additionally the 45th president of the United States has mainly been vocal on immigration and protectionism but remained quite ambiguous on his promised fiscal and government stimulus plans. Market could soon get impatient.
The Nasdaq 100 may have completed the wave 3 reaching 161.8% of the length of wave 1, and we could enter in a short-term corrective wave within the bull market. The RSI on a weekly also reached overbought territory for the first time since end 2015, although this has not been a good sell indicator in the past. The corrective move could potentially reach 4910 which is a 38.2% retracement of wave 3, and near the lower end of the uptrending channel.