Nasdaq correlation with real rates epitomises current risk-on/risk-off tension in the markets

  • NAS100


Considering the weekly timeframe, FXCM's Nasdaq CFD, NAS100, shows a decline (top chart) as the real interest rate appreciates (middle chart). As risk increases, capital will rotate out of the risk asset into a safer income-yielding investment. Moreover, the NAS100's required rate of return has increased, and its present value has adjusted downwards.

This mechanism has resulted in a solid inverse relationship between the NAS100 and real rate, indicated by a -0.83 correlation coefficient. This relationship makes for an interesting daily timeframe:


Given the weekly correlation coefficient, we note that the daily NAS100 shows a sideways consolidation (possible wedge), as the real yield charts a potential flag pattern (bottom chart). These are continuation patterns, implying that if completed, the instruments will continue trending as per the previous price direction.

In our view, the breakout depends on the real rate over NAS100. I.e. if the market needs to discount further tightening, this should be reflected in a real rate breakout and flag pattern completion. The current sideways patterns accompany market indecision regarding the size of the next hike, which has oscillated between 75-100bps. The current probability is 70% for 75bps. Ensuing breakouts or breakdowns will help determine if and when market expectations change.

Russell Shor

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.


Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.

Past Performance: Past Performance is not an indicator of future results.

Spreads Widget: When static spreads are displayed, the figures reflect a time-stamped snapshot as of when the market closes. Spreads are variable and are subject to delay. Single Share prices are subject to a 15 minute delay. The spread figures are for informational purposes only. FXCM is not liable for errors, omissions or delays, or for actions relying on this information.

${} / ${getInstrumentData.ticker} /

Exchange: ${}

${} ${getInstrumentData.divCcy} ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%) ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%)

${getInstrumentData.oneYearLow} 52/wk Range ${getInstrumentData.oneYearHigh}