The NASDAQ 100 has fallen hard again on Monday, as we continue to see a lot of negativity in the marketplace. The 11,600 level is broken to the downside and opens up a new wave of selling, and it now looks as if 11,000 will be threatened in the short term. We could get the occasional rally, but that rally will more likely than not simply offer yet another selling opportunity as the markets are in chaos.
The fact that we are closing at the very bottom of the candlestick typically means that we will get follow-through, and therefore think it is probably only a matter of time before we not only test the 11,000 level, but break down below it to go much lower. Rallies are opportunities as far as I can see, with the first one being at the 11,600 level, followed by the 12,000 level. This is a market that is melting down as interest rates continue to climb, putting a lot of pressure on technology companies that need a growth environment to function.
Furthermore, we continue to see a lot of “risk-off behavior” around the world, and that is not going to do much for the NASDAQ 100 either. I would be a bit surprised to see this market break back above the 12,000 level, but it’s actually not until we break above the 12,800 level that I would be impressed, let alone convince to start buying. I just don’t see how that happens, so ultimately this is a situation where I think we are looking at a market that has only one direction in mind, and that’s much lower.
How far lower we go I have no idea, but I do recognize that there is nothing on the horizon that suggests things are about to change, and unless the Federal Reserve suddenly starts talking about loosening monetary policy, that’s not going to change. With inflation burning as hot as it has, and the fact that it was worse than most of Wall Street anticipated, it should not be a huge surprise to see that the sheep have started running. It's interesting to see that they have done this because quite frankly most of this was obvious beforehand. However, Wall Street has an entire generation of traders that have always been coddled by the Federal Reserve, and therefore misplaced optimism makes sense.
