- The NASDAQ 100 has been very bullish during the month of May but has run into a little bit of trouble during the last week.
- That being said, the market is very strong in general and therefore I think at any juncture, we could see buyers coming back into the market to take advantage of “cheap contracts.”
- With that being the case, you look at this through the prism of trying to find value, and I think that will continue to be the game the traders are playing in the month of June.
Bubble? Probably.
Stock markets are essentially a bubble at this point, mainly due to the fact that there are just a handful of stocks that seem to be driving most of the flow. The biggest suspect in this crime of course is Nvidia, which is suddenly the only game in town for a lot of traders. There have been a lot of gamma squeezes out there, which is when dealers have to cover options positions, thereby buying stock in case they need to hand it over to those who have taken these positions out. It’s a form of self-preservation, and we have seen this play out a couple of times in the past, most notably with GameStop. Nvidia is now starting to head into that territory, although it can be argued that at least Nvidia is a viable company.
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Going forward, I think you have to deal with this through the prism of buying value, which means you’re buying dips. The 17,850 level should be a massive floor in the market, but I would be remiss if I suggested that I think we even get there. If we do, then it could be great value play, and then after that you would have the 17,000 level offer massive support as well, with the 50-Week moving average EMA racing toward that level.
If we break above the 18,900 level, then it’s possible that we could go looking to finally break above the 19,000 level, which would not be a huge stretch of the imagination the way this market has behaved. However, we are a little bit stretched so I don’t know that I would be chasing the trade at this point. I’d be looking for some type of potential pullback to take advantage of.
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