The Nasdaq Composite hit a record close amid divergent market performance, with AI and quantum computing driving tech sector gains while traditional sectors lag. The anticipated Fed rate decision tomorrow has markets pricing in a 95.4% probability of a 25bp cut, though 2025 guidance may be more hawkish than previously expected.
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Nasdaq reaches 38th record close of 2024, up 1.2%
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Broadcom market cap surpasses $1 trillion, stock up 126% YTD
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Bitcoin reaches new ATH above $106,000
Tech Sector Leadership vs Broader Market Weakness
The Nasdaq's strength continues to mask underlying market divergence, with the Dow falling for eight consecutive sessions - its longest losing streak since 2018. The S&P 500 marked its 11th straight session of negative breadth, the longest such streak in available data since 1999, highlighting the narrow nature of market gains.
AI and Quantum Computing Surge
Tech sector momentum remains robust, driven by AI-related developments. Broadcom's stellar performance, including a 220% jump in AI revenue to $12.2 billion, exemplifies the sector's strength. The emergence of quantum computing as a new growth theme has sparked significant investor interest, with companies like Rigetti Computing (+843% over 3 months), D-Wave Quantum (+455%), and IonQ (+398%) seeing dramatic gains despite limited revenue generation.
Index Composition Changes
The Nasdaq 100's annual reconstitution reflects evolving market themes, with Palantir Technologies, Axon Enterprise, and Bitcoin-focused MicroStrategy set to join the index on December 23rd, replacing Moderna, Super Micro Computer, and Illumina. The changes underscore the growing influence of AI, cryptocurrency, and enterprise software sectors.
Rate Cut Expectations
While a 25bp rate cut appears nearly certain for tomorrow's FOMC meeting, the Fed is expected to signal a more conservative easing path for 2025, with projections now pointing to three 25bp cuts rather than four. This adjustment reflects persistent inflation concerns and potential policy impacts from the incoming Trump administration, including proposed tariffs and immigration controls.
The continuation of tech sector dominance, coupled with broad market divergence and evolving monetary policy expectations, suggests ongoing market rotation rather than broad-based strength heading into 2025.
US100 (D1 Interval)
The Nasdaq-100 index, represented by the US100 contract, achieved a record close yesterday. The mid-December high at 21,669 and the mid-November high at 21,255 serve as the initial support levels for bulls, while the mid-July high of 20,895, closely aligned with the 50-day SMA at 20,851, offers additional support. Bears may target 20,896 as a key level to exploit bearish divergence, with subsequent targets including the 100-day SMA and the August highs near 19,917, which represent critical downside levels.
The RSI has entered the overbought zone, potentially accelerating bullish momentum. Meanwhile, the MACD warrants close observation as it is poised to either narrow or expand, providing insight into the pace and sustainability of the current bullish trend. Source: xStation
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