The NASDAQ 100 fell a bit on Tuesday to test the top of the bullish flag that had sent us to this region. By doing so, and then perhaps more importantly, recovering, the market is likely to continue to go to the upside. The bullish flag still measures for a move towards the 18,000 level, but it takes a certain amount of momentum to make that happen.
We continue to see a lot of people jump into this market on dips as they are trying to make up for a lack of returns earlier this year. It is a phenomenon known as the “Santa Claus rally”, which happens every year. Ultimately, I like the idea of picking up value in this market, and as usual you need to pay attention to just a handful of stocks to get an idea as to where the NASDAQ 100 will go going forward. In fact, it is only about seven or eight stocks that matter, including Tesla, Microsoft, and Google. With this being the case, one of the ways that I will trade this index is to pull up eight charts, including this index, and just notice whether or not the major ones are going higher or lower. I know it sounds simplistic, but it does work.
Interest rate issues could come into the picture, because if there is a significant drop in yields, it is possible that the NASDAQ 100 could go higher as traders try to look towards growth stocks in order to earn some type of return. That is typically what the NASDAQ 100 is used for, so keep that in the back of your head. At this point, the 16,000 level appears to be rather supportive, as it is right around the flag. At this point, the market is likely to go higher based upon the reaction that we had, but we may have another day or two of negativity. Nonetheless, I do not have any interest in shorting this market because you do not do that with US indices. The 50-day EMA is currently at the 15,700 level and rising, so I think that would offer a significant amount of dynamic support. At this point, the market is still very bullish and despite the fact that we have had a couple of rough days, this will only end up being a blip on the radar.
