US 100 – All Eyes on the NVIDIA Earnings UpdateUS Tech 100 IndexPEPPERSTONE:NAS100PepperstoneLast week was a challenging one for US 100 traders who had to negotiate a period of increased volatility caused by concerns of the development of an AI bubble leading to over extended valuations for key technology companies, and then a headline speech from Federal Reserve Chairman Powell at the Jackson Hole symposium where he hinted at the potential for rate cuts later in the year. This saw prices drop 3% from opening levels at 23745 on Monday August 18th down to lows of 22970 on August 20th, before rebounding strongly on Friday, back up to current levels around 23545 (0730 BST). While the potential for Fed rate cuts may still be an important driver for the US 100 index, traders are waiting for key future economic data updates to provide more clarity on whether a 25bps (0.25%) cut is possible when the Fed meet next on September 17th. Before then traders will be waiting on the Friday August 29th PCE Index release, (Fed’s preferred inflation gauge), Friday September 5th Non-farm Payrolls release, especially given how Chairman Powell indicated a link between the health of the US labour market and potential rate cuts, and then the next US CPI update on Thursday September 11th. This data waiting game means volatility for the US 100 index could be determined this week by details provided by NVIDIA in their Q2 earnings update which is due after the market close later today. NVIDIA is the world’s biggest company by market capitalisation (circa $4.4 trillion) and is considered the bellwether for AI demand and revenue performance. While traders may be focused on judging actual earnings performance against expectations, they could also be looking for reassurance regarding the strength of AI spending, as a more cautious outlook for future earnings could bring a negative reaction to AI stocks in the US 100. Being prepared for an extended period of volatility in the US 100 index may be a wise move. Technical Update: Still Positive Sentiment into NVIDIA Earnings? Although the US 100 index entered a correction phase from the August 13th high of 23986 to the August 20th low of 22970, the overall positive trend that began at the April 7th low of 16290, appears to remain intact. As the chart above shows, since the April 7th low, the US 100 index has traced out a pattern of higher highs and higher lows in price. This suggests positive sentiment, with buyers appearing at higher levels after each pullback. As long as this pattern of rising lows continues, the outlook could be viewed as skewing risks toward further attempts at upward movement in price. While positive sentiment does currently appear to remain in place, NVIDIA’s upcoming earnings report has the potential to shift market sentiment. Therefore, it’s important to identify and monitor the next key support and resistance levels to be prepared in case an increase in volatility develops. Potential Support Levels: After finding support at 22970 on August 20th, traders are likely still watching this level. As long as prices continue to close above 22970, a more positive outlook could still be viewed as valid. However, a negative reaction to NVIDIA earnings if seen, may result in closes below this support level, even signal a sentiment shift toward the possibility of further price declines. While a break below 22970 doesn’t guarantee further price weakness, it could open the door toward a test of 22678, the August 1st low, and potentially even 21375, which marks the June 23rd downside extreme. Potential Resistance Levels: Following the recent rebound from the August 20th low of 22970, the first key resistance is likely to be the all-time high of 23986 set on August 13th. A close above this resistance level at 23986 could signal improving momentum and the potential for further attempts at price strength. If this break is sustained, traders may start to focus on levels at 24,421 and 24,665, corresponding to the 38.2% and 61.8% Fibonacci extension levels, respectively. The material provided here has not been prepared accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research, we will not seek to take any advantage before providing it to our clients. Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. 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