- If you are the type of person who likes playing with fire, the NASDAQ 100 is for you.
- It’s not that I think this market is suddenly going to implode and that we are going to see some type of massive downtrend in the short term, it’s just that much like its counterpart the S&P 500, we are simply overdone at this point.
- Remember, the NASDAQ 100 should be called the “NASDAQ 7”, because it’s about 7 stocks that make up almost the entirety of momentum.
Look For Value
As far as stock markets are concerned, sometime this year we are going to get a nasty pullback. This does make a certain amount of sense because while Wall Street is celebrating lower interest rates coming this year, the reality is that quite often the Federal Reserve starts cutting rates because it sees something somewhat ugly in the economy. If that’s going to be the case, then this could be a very intriguing index, to say the least. After all, it’s the “go-to” for money managers so that they can get exposure to the usual 7 suspects, but traders will probably start selling to collect profit. You can counterbalance that argument by saying that if rates are going lower, it propels money into technology.
The question of course is whether or not the Federal Reserve is going to start loosening monetary policy because inflation is in check, or if it’s because the economy is desperately going to need it. When you look at this chart, it’s very bullish and I certainly would not advocate shorting this market. However, I don’t advocate chasing this move. The NASDAQ 100 is up roughly 20% since late October, which of course is not normal behavior. That being said, the market has proven to be so heavily manipulated by just a handful of stocks that you cannot consider selling it. What we want to see is some type of significant beat down, perhaps in the order of about 10% to start buying again. The 15,780 level is an area that I think should show a lot of support, so I would love to see the market drop to that area, but unfortunately, I think this is going to be a situation where you probably won’t even get that much of a pullback. Either way, chasing isn’t advised either. Sooner or later, markets do retrace and that’s when you need to be involved.
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