Investors in Wall Street are concerned about the aggressive efforts the Federal Reserve is making to control the level of short-term debt.
However, the Fed has encountered some problems along the way. In particular, a little over a month ago, they encountered difficulties in the repo market. The central bank encountered a liquidity problem causing an increase in several rates. In turn, the Federal Reserve forced the institutions to maintain an adequate level of liquidity.
Investors, for their part, are cautious because the efforts so far have worked, but nothing ensures that they will continue to work in the future.
Currently, the Federal Reserve is using its balance sheet to ensure that banks manage to have enough reserves and capital flows efficiently.
The problem surges as a result of the last announcement made by chairman Powell about the purchase of about $ 60 billion a month in Treasury bills.
Analysts explain that the Fed doesn't distinguish enough the credit quality of some institutions by providing cash in exchange for collateral.
This situation could increase its complexity at the end of the year. During this period, banks focus on maintain liquidity against overnight cash transactions.
Technical overview
The NASDAQ daily chart shows a potential Elliott Wave Pattern as an Ending Diagonal.
The internal sequence has a 3-3-3-3-3 structure. Currently, the technologic index could be running in the fifth segment. Given the Elliott Wave structure formed, there is a high likelihood of an increase from the actual zone to all-time highs between the 8,070 pts, and 8,210 pts.
In summary, the long-term wave pattern for NASDAQ corresponds to a topping structure, with further potential for new advances.
The short-term scenario is also bullish. The potential ending for the current segment is between 8,070 pts and $8,210 pts.
The invalidation level for the long-side scenario is a breakdown of the early October's low at 7,461 pts. In the case NASDAQ breaks below this invalidation level, a test of the 7,004 pts can be expected.
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