At the end of the day, this looks extraordinarily bullish.
The NASDAQ 100 initially pulled back a bit on Friday, but as you can see, we rallied to reach towards the 15,844 handle. By doing so, we have made yet again another high in this market, as we are racing towards the 16,000 level. Big cap stocks in the technology sector continue to be some of the favored trade as there are no yields to be had in the bond markets. Yes, interest rates are rising a bit, but they are nowhere near what we need them to be to pay any type of positive yield in this inflationary environment.
When inflation starts to take hold, the only way to make any real money is to find stocks that still see plenty of growth. In other words, think of places like Tesla, Amazon, or the like. It is just a handful of stocks in the NASDAQ 100 that drive the totality of the index, so as long as all the “Wall Street darlings” are performing okay, by definition this market needs to go higher. I think short-term pullbacks will continue to be bought into, with the 15,500 level underneath being a bit of a short-term floor.
If we were to break down below there, we also have the 50-day EMA just below, and the previous uptrend line. After that, then we are looking towards the 14,500 level, which is an area that has offered major support previously. The 200-day EMA is starting to reach to that level, but I do not think we will get anywhere near there. If we were to break down below the 14,500 level it would be a significant breakdown and I suspect that you would see major “risk off” moves across-the-board. I might be a buyer of puts, but I would never short this market as it is a great way to lose a lot of money. Ultimately, as we continue to see this market stretch to the upside, it is likely that we will see 16,000 in the rearview mirror sooner rather than later. Pullbacks at this point have to be looked at as opportunities, so I think a lot of traders are waiting to pick up any offer of value that we get going forward. At the end of the day, this looks extraordinarily bullish.