Nasdaq 100 futures are attempting to establish a swing low after a three-wave decline, with bullish technical signals emerging on the daily chart. However, the latest COT report reveals that both large speculators and asset managers have been reducing exposure rather than embracing the recent rebound, leaving the sustainability of any rally open to question.
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Nasdaq Futures (NQ) Market Positioning | COT Report
We’re seeing a mixed picture for the tech sector among Wall Street futures traders. Large speculators flipped to net-short exposure back in early May, although in recent weeks we’ve seen a notable decline in both long and short positions. This suggests large speculators are de-risking their Nasdaq futures exposure rather than simply betting aggressively against the index.
Meanwhile, net-long exposure among asset managers has fallen by around a third in just six weeks. However, the main driver has been the closing of gross long positions rather than a surge in short bets.
To me, this suggests traders remain cautious towards the Nasdaq around its record highs, but they are not outright bearish. The AI theme appears to be losing some of its sparkle, so it makes sense that some traders are questioning whether the index could see a pullback before attempting to break to fresh record highs.
Source: CME, CFTC (COT), LSEG
Nasdaq 100 Futures Technical Analysis: Bullish Divergence Signals Potential Swing Low
Price action on the Nasdaq 100 futures chart has been choppy since it printed a double top just shy of the 31,000 record high. While bears have clearly had the upper hand, it appears we've now seen a three-wave move lower and the market is attempting to find support.
Note that a bullish pin bar formed on Wednesday, with its low holding above the monthly pivot point before closing above the 50-day EMA. The lower wick also pierced both the June 26 low and the 29,000 handle before prices closed back above them. Furthermore, the daily RSI (2) has formed a bullish divergence. This suggests a swing low may have formed, or that the Nasdaq 100 is close to establishing one.
The question now may be more about how high bulls can take the rebound, assuming they can at all. The monthly pivot point sits just below 30,000, making it a likely resistance zone over the near term. Beyond that, the swing high around 30,500 could also stymie an immediate retest of the record high without a genuine risk-on catalyst.
Source: CME, CFTC (COT), LSEG
Nasdaq 100 Futures (NQ): Low Volume Keeps Recovery in Check
The 1-hour chart shows that the recent volume spike occurred alongside a bearish candle, while volumes during the subsequent rally have remained subdued. This suggests the recent advance lacks strong conviction. Prices may retrace within yesterday's range, improving the risk-to-reward profile for bulls. The weekly pivot point at 29,800 and the 30,000 level appear to be viable upside targets, although traders should also be alert to the risk of bears fading any rally into those levels.
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-- Written by Matt Simpson
Follow Matt on Twitter @cLeverEdge
