The trading session on Thursday has been a bit of a nightmare because we have seen such a wild swings. That being said, it is worth noting that the CPI numbers came out much hotter than anticipated, and therefore traders were starting to become worried about inflation. However, for some reason we started to recover, mainly due to the fact that the US dollar started to lose strength, which of course helps the NASDAQ 100.
Looking at the size of the candlestick, it is very likely that we have a little bit of follow-through, as we are closing at the very bottom of the range, and quite frankly if you did not trade intraday, you would have no idea just how volatile things are. Volatility is the enemy of risk appetite, and the NASDAQ 100 of course is the epitome of risk appetite.
Speaking of intraday, we fell hard, turned around and recovered like I said, and then St. Louis Federal Reserve Gov. James Bullard then suggested that he wanted to see at least the 50 basis points rate hike at the next meeting, and to see 100 basis points between now and July. That of course scares the markets, because now we start to think about the fact that the Federal Reserve is behind the curve. This means that they will probably get aggressive with their rate hikes, and then perhaps even lose control of everything. Do not get me wrong, I think there is only so much economic and financial damage waiting to happen, because at the end of the day the Federal Reserve protects Wall Street before protects Main Street. However, that does not mean that we will not at least make an attempt to do some window dressing between now and the midterms for the Biden administration that now faces the highest inflationary numbers since 1982.
At this point, you can also make an argument for a bearish flag, or perhaps even a bit of a rising wedge. Either way, the market could go lower, perhaps reaching towards the 14,000 level if we break through the 14,450 level. At this point, I do not trust this market would have no interest whatsoever in trying to buy it, unless of course something changes fundamentally or somebody from the Federal Reserve walks back the idea of hiking rates.
