The NASDAQ 100 has fallen during the trading session on Friday, reaching below the 11,000 handle rather significantly. However, by the end of the day, we did see the market bounce a bit, but it should be noted that it was quadruple witching day, so therefore a lot of options trading and forth buying/selling of index futures and ETF listings will have occurred. It is because of this that you cannot read too much into the candlestick other than it did pierce support and that does make the downside move a very real possibility from here.
The NASDAQ 100 has been moving based upon a handful of stocks, so the fact that we would break down might not be a huge surprise given that the market has been buying the same stocks over and over, meaning the valuations are extraordinarily high. That does not mean that we fall forever, but it does suggest that perhaps we are due for the market to fall enough to find a more reasonable level. The 10,500 level is possibly the target if we break down, and then possibly the 10,000 level underneath, which is roughly where the 200 day EMA is presently running towards and is an area where a lot of people will be paying attention to.
To the upside, I think that there is a lot of noise between here and 11,500, so do not be surprised at all if we struggle to hang on to gains in the short term. A break above the 11,500 level could send this market much higher, reaching towards the 12,000 level, followed by the highs again. However, we would need to see some type of reason for traders to get overly excited, something that seems a bit far-fetched at the moment.
Pay attention to the US dollar, because if it starts to strengthen that could also put pressure on the NASDAQ 100, and we are starting to see signs that the US dollar is ready to at least recover some of the previous losses. If that is going to be the case, it could continue to pressure the NASDAQ 100 going forward. Ultimately, this is a market that I think will be very volatile, and I believe that as we head towards the election, stocks, in general, are going to be noisier.
