- The NASDAQ 100 experienced an early rally on Monday, as has been the norm.
- However, questions arise about whether signs of fatigue are emerging ahead of the Federal Reserve meeting scheduled for Wednesday.
The NASDAQ 100's early surge on Monday is noteworthy, but there are notable factors to consider just above its current levels. Last week, on both Thursday and Friday, a shooting star pattern was formed, indicating a potential overextension in the market. In this context, a pullback appears to be a more sensible expectation, with the 20-day Exponential Moving Average and the 16,950 level below serving as potential points for buying opportunities. It's important to note that there have been instances in the past where pullbacks seemed likely, but the market defied expectations. Consequently, the prudent approach in this scenario is to consider buying on dips and refrain from shorting the market.
Underneath…
Even if the market were to decline to the 17,000 level, it would not warrant selling the NASDAQ 100. This index operates in its own unique realm. Looking ahead, Wednesday holds the Federal Open Market Committee (FOMC) meeting and, perhaps more crucially, a press conference following the decision. This event is expected to exert a substantial influence on trading activity leading up to it, as market participants are likely to avoid overexposure due to potential volatility. The meeting's outcome will offer clarity and guide Wall Street's appetite for risk, possibly prompting either an increase in risk-taking or a surge in panic.
A modest drift coupled with a slight pullback seems to be the most plausible scenario. However, it's important to watch for a potential breakthrough above the levels marked by the two shooting stars, as that would signal a robust bullish trend. The NASDAQ 100's performance is largely driven by a select group of companies. Consequently, investors should closely monitor the usual suspects—these companies are like the cornerstone holdings in an ETF that comprises seven major stocks along with 93 others that sometimes catch investors' attention.
At the end of the day, the NASDAQ 100's recent price action hints at the possibility of a pullback. The market's response to the upcoming FOMC meeting and press conference will likely determine its near-term direction. Despite potential volatility, it remains prudent to consider buying opportunities on dips rather than shorting the market, given the NASDAQ 100's unique dynamics and the dominance of a handful of key stocks.
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