Nasdaq Gains 10%+ in November, Record Highs Next?

The tech-heavy index has rocketed over 10% in November, but recent low volatility has some people speculating that the Christmas rally might have come early. Can the rebound continue to record highs?

Up, Up, and Awaiting a Catalyst

Since hitting bottom in October at 14055, the US Tech index has made an impressive rally of over 10%, recovering all of its losses and spiking above 16K for the first time since January 2022. After its November gains, the premier technology index trades just 5.30% off its record highs at 16767. The strong rally seems to have slowed since earnings season is over, and markets look forward to the final Fed rate decision of the year with near-unanimous expectations that there won't be any policy change.

Some analysts fret that the Santa Rally has come early since it usually occurs in a period of lower volatility characterised by traders' holidays. However, the market will now have to digest the latest move seen as part of the typical year-end move by portfolio managers supporting the holiday rally. Analysts who subscribe to that view suggest trading will be range-bound, as the impetus to break the barrier of a new record might be lacking, with traders looking forward to taking some time off.

Any Chance of a Record?

The dour mood among some analysts comes in the wake of what would otherwise be good news: US Q3 GDP was revised even higher. But that supported the argument that the Fed could go through with another rate hike. The mixed messaging from FOMC members has some investors scratching their heads, too. Furthermore, the strong GDP numbers have a dark side: Large government spending is seen as the primary driver of headline GDP growth, as consumer spending disappoints. 

Persistent inflation pressure would keep the Fed hawkish and prevent the Nasdaq from hitting a new record. But, if the Fed were to come out more dovish, such as suggesting that current policy is fine even if bond yields go down or that they see inflation pressures abating, then the markets could experience a relief rally just as the Santa Rally is supposed to hit. Given the high GDP figure for the last quarter, signs of a cooling economy might be more positive for the stock market, such as NFP coming in at or slightly below expectations.

Wedge Points to Pullbacks

Apart from the peak of 16165, there doesn't seem to be a solid resistance bulls might face aside from the typical round levels of 16250 and 16500 and the record high itself. That is if the index continues higher. Focusing on the wedge pattern suggests that further pullbacks may ensue, with support weakness at 15750 opening the door to 15340. Losing 15K could change the course of the Tech 100 index completely. 

Source: SpreadEx / US TECH 100

Key Takeaways

The Nasdaq has experienced a rally of over 10% in November, recovering all previous losses and approaching record highs. Some analysts speculate that the Christmas rally may have come early due to low volatility, but the market must now digest the recent move. Concerns exist about the potential for a new record high, as mixed messaging from the Fed and persistent inflation pressure could hinder the Nasdaq's progress.