- The NASDAQ 100 has pulled back a bit during the trading session on Wednesday, as retail sales came out hotter than anticipated.
- The perverse economic situation that we find ourselves in currently, it suggests that inflation is the number one concern for traders right now. If demand remains strong, it suggests that inflation will continue to be a major issue.
- In that situation, the Federal Reserve is going to continue to have to find a reason to fight all this demand.
At this point, the 50-Day EMA sits just below the previous resistance barrier that we are sitting on, and therefore I think we got an area of inflection. The question now is whether the market can break down through the 11,700 level, because it then opens up the possibility of a bigger move. If it does not have the ability to break down below there, then it’s likely that we could go to the 12,000 level. Ultimately, we are sitting between the 50-Day EMA and the 200-Day EMA an area that causes a lot of noisy behavior. Because of this, I would anticipate more chop, especially as we are during earnings season and some of the earnings calls have left a lot to be desired.
Pay Attention to the Greenback
Pay attention to the US dollar, because if it starts to strengthen again, it could also work against the NASDAQ 100, especially as we have a whole slew of Federal Reserve speakers over the next couple of days. Looking at the chart, the question now is whether this was a true breakout above the 11,700 level, or if it was simply a “throw over.” I think that you will probably have some clarity in the next couple of days, but this market at the very least needs to grind back and forth to work off some of the excesses since the CPI numbers shocked everybody.
It’s probably worth noting that the inflation numbers are still far too strong for the Federal Reserve to be comfortable, so traders are betting on the rate of change more than the idea that the Fed is going to actually stop. In fact, it seems very unlikely that they will, at least anytime soon. Interest rates are probably in the mix until the middle of next year, and that should continue to keep the market somewhat under pressure over the longer term.
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