You can count on major swings in the marketplace, so you would need to be very cautious with your position size for the month.
The NASDAQ 100 shot higher during the month of February, reaching towards the 14,000 level. At this point, the market then turned around to form a bit of a shooting star. This is an ugly candlestick, and at this point it does suggest that we could pull back a bit. The question now is whether or not the NASDAQ 100 can recover. One of the perplexing issues out there is the fact that the Federal Reserve seems to think that there is no inflation, when commodity markets have gone straight up in the air. The Federal Reserve has stated that there could be occasional bounces in inflation like we have seen, but as we have seen in the past, they will eventually jump in to save the markets.
This is part of why I am thinking that for the next month or two we may get a pull back, only to see the market turn around and recover. I believe that we could see a wild March, bouncing around between the 14,000 level on the top and the 12,000 level on the bottom. In other words, I think you can count on major swings in the marketplace, so you would need to be very cautious with your position size for the month. Remember, the NASDAQ 100 has been a darling of Wall Street for some time, but if yields continue to rise, traders will get out of that and start buying bonds in order to clip those coupons and get away from the volatility that this index tends to have.
One of the biggest problems that we have seen has been the bond yields rising too quickly, and it has people concerned at the moment. I do not necessarily think that we will have some type of major collapse, but I do think that a correction is coming, and coming quite soon. On the other hand, if we were to break above the 14,000 level, that could send this market parabolic again, but I do not think that would be very healthy in the short term as we simply need to work off the froth that we have seen as of late. I am not truly concerned about the overall uptrend until we break down below the 11,000 level.