On Monday, the NASDAQ 100 initially dipped to test the 50-Day EMA. However, we have since bounced from there and it looks like we are content to hang about the 16,000 level. This is actually a very bullish turn of events, due to the fact that the market has shown itself to be very overextended. At this point, I think you’ve got a situation where short-term debts could be thought of as potential buying opportunities, but at this point in time it’s obvious that you need to be cautious about a potential pullback. That pullback is probably going to be a nice buying opportunity eventually but jumping “all in” to the market after a sharp 10% increase is very difficult to do. After all, the idea of chasing the trade comes into the picture.
If we do break down below the 50-Day EMA, then I will turn my attention to the 200-Day EMA, currently sitting right around the 15,600 level. The 200-Day EMA typically will attract a lot of attention anyway, so I think it would make a certain amount of sense as value hunters try to come back into the market to pick up “cheap stocks.” Keep in mind that we are at the end of the year, and a lot of traders will be looking for some type of way to own all of the correct assets based upon returns.
Thriving in a Market Dominated by 7 Key Stocks
Keep in mind that the “correct assets” are going to be roughly 7 stocks. The markets are so drastically strapped to just a handful of names that it is somewhat of a precarious situation. After all, if we start to see Tesla, Microsoft, Apple, etc. lose a bit of momentum, that will bring the rest of the market down with it. However, it is the game that we are playing at the moment, and therefore it’s the game you have to play.
I have no interest in shorting the NASDAQ 100 anytime soon, as it is clear that traders continue to look for value opportunities every time it pulls back. It is possible that we simply go sideways in order to work off excess momentum, which is something that you see from time to time in all markets. Either way, shorting the market is inadvisable at this point in time, due to the fact that there is so much bullish pressure, and of course we have the so-called “Santa Claus rally” perhaps kicking off.
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