As we are oversold, what I’m looking to do is short this market at the first signs of exhaustion after a rally.
- The NASDAQ 100 fell during most of the trading session on Tuesday, as traders came back from the Labor Day holiday.
- The market threatened the 12,000 level, which of course is a large, round, psychologically significant figure.
- Furthermore, the market has previously seen this as a support level, at the top of an ascending triangle previously.
The question now is whether we are going to break down quite drastically, but it looks very unlikely in the short term. If we were to break above the top of the candlestick, then we might get a little bit of a short-term relief rally, which would make sense considering how oversold we are in the short term. The 12,400 level above could offer resistance based upon the last couple of candlesticks, and then of course the 50 Day EMA is closer to the 12,500 level, which is a level that has a certain amount of psychology attached to it as well.
Looking for Signs of Exhaustion
The NASDAQ 100 of course is starting to really break down, which is not a huge surprise considering just how volatile the markets have been overall, and therefore you need to see markets through the prism of finding an opportunity to short on rallies. As we are oversold, what I’m looking to do is short this market at the first signs of exhaustion after a rally. I do believe that it is a scenario where the market is overdone, and almost everybody out there that wants to be short already is. We have the possibility of her earnings continuing to cause issues, as well as rates.
Keep in mind that the markets will continue to see this as a “paid the rally” type of situation, especially as interest rates should continue to see higher levels, therefore technology stocks will continue to suffer. Keep in mind that it’s just a handful of stocks that moves this market, essentially Tesla, Microsoft, Amazon, Alphabet, and the like. If those start to fall, the NASDAQ 100 will have almost no chance of rallying. The last several days have been a bit overdone, so a little bit of patience will probably go a long way. However, if we were to break down to fresh, new lows, especially if we clear the 11,880 level, then I think we just simply fall to the 11,000 level.