Why splendid employment data spells a bearish trend for Nasdaq?

The limelight in today's technical analysis undeniably falls upon indices, courtesy of the first Friday of the month delivering non-farm payrolls that staggeringly surpassed expectations: a solid 336,000 against the forecasted 171,000. This exhilarating number, counterintuitively, catalyzed a bearish dip in indices. And the rationale behind this somewhat paradoxical reaction? Quite straightforward, really.

When the economy performs robustly, as is the evident case here, room to elevate rates in a bid to counteract inflation becomes a palpable reality. This perspective of potential rate hikes inherently casts a shadow on indices while simultaneously propelling the American dollar, a sequence clearly evidenced in current market dynamics. The prevailing sentiment leans towards expectations of further rate augmentations.

Drilling down into the technical specifics, particularly zeroing in on the Nasdaq, we observe a petite sideways trend firmly in place since the 21st of September, encapsulated between two orange lines. Zooming out for a broader perspective reveals a falling wedge pattern, delineated by black lines, wherein the lower orange and black lines stand out as pivotal supports for Nasdaq.

A descent below these two lines, marked by a price closure beneath them today, would unfurl an unambiguous sell signal, whereas maintaining a position above allows buyers to harbor a glimmer of hope for a rebound off these supports. While the current situation doesn’t explicitly unfurl a major sell signal, it lingers ominously on the horizon, with the trigger poised to be pulled upon a breakdown of those two supports.