Real Yield vs. AI
Market mathematics suggests that as the real yield appreciates, pressure is felt by the growth side of the market e.g., NAS100. However, this has not been the case for 2023. On the contrary, the NAS100 had charted an uptrend by the end of January this year, when is completed a higher trough (HT) followed by a higher peak (HP.) It continued moving higher, even after the real yield started moving up in April (blue dashed vertical).
This is seemingly odd price action. However, the NAS100 was riding the artificial intelligence (AI) wave upwards. This seems to be the Wall Street consensus – that AI will drive markets higher. In this case, as AI evolves it will be a strong tailwind for the NAS100.
Thus, there is an element of competing forces now – the higher real yield versus AI technology, and AI technology is winning.
NAS100 Weekly Chart Trend Analysis
Despite the higher real yield, the NAS100 remains in uptrend. There are several technical aspects which connote a positive index.
- The NAS100 has charted a series of higher troughs (HT) followed by higher peaks (HP).
- The index is above its black 30-week EMA and the EMA is pointing up, suggesting the NAS100 is in a mark-up phase.
- The weekly RSI remains on the bullish side of 50 (blue rectangle). The longer this is maintained, the greater the probability of a higher price ahead.
- The RSI went overbought for several weeks (black ellipse), but the index pulled back and the RSI normalised (blue dashed vertical).
- This laid the foundation for the latest higher trough in the series. This, in turn, has laid the platform for the next higher peak in the series, which will depend on the two variables – the higher real yield and AI evolution.
- If AI continues to dominate the real yield, then the NAS100 is likely to respond favourably.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.