The NASDAQ 100 has initially pulled back a bit during the trading session on Tuesday only to shoot above the 10,000 level at one point during the day. Ultimately, the 10,000 level as an area that caused a little bit of position covering but obviously it is just a round number, and not necessarily something that is going to keep the market from ever going higher. We are overbought, I think that it is obvious but that should only offer an opportunity for those who are missing out on the rally to get involved at cheaper prices. In fact, I suspect that is what people are simply waiting on.
To the downside, I believe that the 9500 level is still a massive floor in the market and should offer plenty of support. Below there, we could see the 50 day EMA come into play, which is currently just underneath the 9100 level, but I would be rather surprised if we ended up testing that level anytime soon. We do have a potential headline causing event at the end of the session on Wednesday though, which of course is the statement coming out of the Federal Reserve after its Tuesday meeting.
It is very unlikely that the Federal Reserve will say anything to cause turmoil in the markets, so I do believe that it will not be much of a factor. I think this is simple profit-taking that is needed at this point, as the 10,000 level is just as good of a place as any other one to get involved. After all, it is a nice large, round, psychologically significant figure, and that quite often attracts attention.
If we do simply go higher from here, it is likely that the 10,000 level will be left in the dust, as it will be more of a “blow off top. That is typically an extremely negative thing, because it shows extreme euphoria, and a market that is more than likely going to see a massive turnaround as soon as there is trouble. Let us be honest here, there is a lot of trouble out there just waiting to happen, so we need to be extremely cautious about trying to get too cute with everything. Longer-term, I do think that we go higher but obviously when you look at the parabolic nature this market, we certainly could use a little bit of a pullback just to come back to earth.
