The NASDAQ 100 rallied a bit during the trading session on Tuesday to touch the 50-Day EMA. Perhaps people are trying to front run the earnings calls from both Microsoft and Google after the bell on Wednesday, but I think they are going to be disappointed. The 50-Day EMA is of course a technical indicator that a lot of people pay close attention to, so it is worth noting that the market pullback from there.
If we do break out from here, we could fall as low as 11,000 over the next several sessions, which is an area that has a lot of large, round, psychological importance attached to it. I do believe that this is a scenario where you are looking to fade rallies, and it’s possible that we may be getting ready to have that play out here. That being said, the market is likely to continue to see a lot of noisy behavior regardless, so with that in mind you need to be cautious with your position sizing. After all, Wall Street seems to have a narrative for everything, as the permabulls remain out there. In fact, it’s kind of impressive just how resilient they been, especially considering just how many negative headlines there are out there. However, you should always remember that it’s Wall Street’s job to sell you stocks, so keep that in mind.
If we break down below the bottom of the candlestick for the trading session on Tuesday, then it’s possible that we see this market breakdown, but that doesn’t necessarily mean that it’s going to be easy. On the other hand, if we overcome the 50-Day EMA, then it’s also possible that we see this market go looking to the 12,000 level next. Regardless, we are in the midst of earnings season so one would have to think that sooner or later we will see some type of panic moved to the downside, because in this environment it’s hard to believe that all news is going to be good anytime soon.
- Be cautious but recognize that we are most certainly in a negative market, and therefore you need to get your opportunities from time to time, and take them when they occur.
- The Federal Reserve will continue to work against the value of stocks for the foreseeable future as inflation continues to rage.
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