Nasdaq Index Outlook: Microsoft (MSFT) scares Markets despite strong Services PMI report

Stock Markets opened mixed after a mildly positive overnight session in Futures and Global Indexes trading.

But after the ADP Miss confirming further next week's rate cuts and pricing in higher chances of another January cut (currently at 27% pricing), the fresh Services PMI beat sent conflicting signs to traders.

The headline number came in at 52.6 (beating the 52.1 forecast), but the internals provided the real story.

On a positive note for the inflation outlook, the Prices Paid index declined significantly from 70.0 to 65.4, which confirms that tariff-led inflation was more of a one-time increase rather than a lasting effect—something that allows the Fed to be more flexible.

This view was further solidified by an unchanged import prices report (0.0% vs 0.1% expected) also released at 10:00 A.M (Even if the data is from September).

In other conflicting news, despite a way-more positive mood with the rate cut, Microsoft (MSFT) just sent a scary sign for the rebounding AI trend.

The tech giant gapped lower by 2.80% after a news article reported that the market leader has lowered its sales growth targets for newer AI products due to slower customer adoption.

This puts the AI-Peak conversations right back on the table.

The Nasdaq is getting dragged lower by this headline and is the only US index down on the current session, diverging sharply from a booming Dow Jones and Russell 2000. Rate cuts don't seem to be enough to offset such specific pessimistic news for the tech sector.

Let's dive into a multi-timeframe analysis of the Tech-heavy index as the divergence persists.

The Index has rebounded remarkably from its November lows (23,841) and now trades about 7.40% higher.

An ongoing dip-buying attempts are trying to lift the Index but is getting rejected.

The price action remains above the higher timeframe pivot (25,000 Level) giving bulls the upper hand, particularly after breaking out of the November bear Channel.

If the session doesn't close green, some profit-taking flows can easily take place.

Let's see why on shorter timeframes.

Mean-reversion buyers are stepping in as we near the London Fix.

An attempt to break out of the Intermediate 25,000 (+/- 75 pts) Resistance is preventing the spreading of bearish flows as Microsoft attempts to correct the story that shook the Market at the open.

Still, the bearish candle from this morning may form the beginning of a bearish intraday divergence which will need to be tracked closely as Traders await Friday's Core PCE report and next Wednesday's FOMC.

Nasdaq technical levels of interest:

Resistance Levels

• Resistance at 25,500 Gap +/- 75 pts (testing)
• Intermediate resistance and 4H MA 50 25,700 to 25,850
• All-time high resistance zone 26,100 to 26,300
• October 30 All-time Highs 26,283

Support Levels

• Pivot 25,000 to 25,250 (4H MA 50 and 200)
• 24,500 Main Support
• November lows 23,841
• Early 2025 ATH at 22,000 to 22,229 Support

The 1H Timeframe depicts a short-timeframe Hourly Bull Channel which acted as a trigger for the ongoing bullish rebound leaving buyers in control.

Still, they will have to break the overnight futures Highs (25,645) if they want to re-integrate the broken May upwards Channel.

For Bears, look for a close below 25,350 which should coincide with a Channel break.

The Hourly Channel is the technical indicator to keep your eyes on for intraday trading.

Safe Trades!

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