I do not like the idea of getting too cute with this, so shorting is all but impossible, even if you told me that we were going to fall tomorrow.
The NASDAQ 100 has been very noisy over November as it looks like we are trying to figure out where to go next. That being said, as we drift into December, I do think it is probably only a matter of time before we get to the 17,000 level, and perhaps even further than that. I do believe that this is a market that will ultimately enjoy the “Santa Claus rally” just as the other US indices will. This is the phenomenon when money managers chase returns due to underperformance earlier in the year.
When I look at this chart, I can see that the 16,000 level has offered a bit of support over the last several weeks, but I think the real support probably comes in closer to the 15,500 level, assuming that we even break down anywhere near there. I do not necessarily think that we will, but I do recognize that this is a market that could do anything once we get closer to the holidays, as liquidity issues could be a serious problem. After all, the markets will continue to look at this through the prism of a longer-term uptrend, but there is also the concern that at the end of the year a lot of traders have to book gains in order to report them to clients. In other words, the closer we get towards the holidays, the more likely the moves are going to be erratic.
I believe that the ultimate “floor in the market” at this point is probably 15,000, and I would be surprised to see the market break down through there. If we do, I might be willing to buy puts for a short-term trade, but that is about as aggressive as I would get to the downside. To the upside, I believe that 17,000 will just be a footnote along the way as we continue to rally overall. I do not like the idea of getting too cute with this, so shorting is all but impossible, even if you told me that we were going to fall tomorrow. Buying puts could offer a way to profit from that move, but really at this point in time you are more likely than not to look at dips as buying opportunities mainly because once January kicks off, traders will have to go back into the markets to pick up risk again.