- The NASDAQ 100 dipped lower to kick off the trading session on Tuesday, and then dropped down to the 13,000 level. \
- The 13,000 level is a large, round, psychologically significant figure, as it was also an area where we have seen a lot of support and resistance previously.
Algorithmic Traders Likely to Return
The 13,000 level being broken to the downside could send this market down to the 12250 level. The 50-day EMA is right there as well and rising, so I think it’s probably only a matter of time before the technical analysis comes back into the picture and a certain amount of algorithmic traders will jump into the market based on that as well, and the “market memory” that comes into the picture as we had seen resistance previously.
The 13,500 level above is resistance, so if we were to break above there, then it’s likely that the NASDAQ 100 could go looking to the 200-day EMA, which sits just above the 14,000 level. The market break above there would send the NASDAQ 100 higher, as it is the technical definition of a bullish run. Alternately, if we were to break down below the 50 Day EMA and the 12,250 level, then it could send this market much lower, perhaps down to the 11,500 level.
Technology stocks will get crushed if the CPI comes in hotter than anticipated, as people will start to price in the idea of higher interest rates, thereby putting a beating on technology stocks. I suspect that more than anything else, we will see a lot of volatility, which you could probably say about any market right now as there are so many crosscurrents. That’s going to be the story going forward, but it’s more likely than not that the Federal Reserve will have to remain tight for much longer than the beggars on Wall Street believe.
This is all about whether or not the Wall Street traders will have the ability to get cheap or free money, because if they have to pay for it, then it suddenly becomes an issue. This has nothing to do with the economy, but the CPI number will give you an idea as to whether or not we will be able to borrow money at almost no interest whatsoever.
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