Fading rallies continues to be the best way forward in this market.
- The NASDAQ 100 formed a nasty candlestick during the trading session on Friday, as we initially gapped higher. By the end of the day the market had sold quite drastically, to form a bearish engulfing candlestick.
- The ugliness of this candlestick cannot be overstated because it shows that there are still people out there that initially believe that a cooler than expected jobs market may have the Federal Reserve easing monetary policy.
- After a while, the adults came back and started selling off the market, as it is obvious, they cannot do such monetary policy with over 8% inflation year-over-year.
The market closed at essentially the lows of the day, and now it looks as if it is going to threaten the 12,000 level. It is probably only a matter of time before the market breakthrough there and continues to go much lower. At that break, it’s very likely that we will find another thousand points to the downside. Any break below their opens a fresh leg lower, and at this point I would not rule that out. After all, stocks continue to get hammered by the idea of a tight monetary policy coming out of the Federal Reserve, which is something that you can count on.
Traders Avoid Risky Assets
It’s a bit of a surprise that the trading public does not seem to believe the Federal Reserve, but it is also the Federal Reserve’s fault. After all, they have shown Wall Street they will do whatever they can to protect Wall Street over the last 14 years, so they have nobody to blame but themselves. Ultimately, at this point any rally in this market is almost always going to be a selling opportunity, but it should be in the back of your mind that any electronic trading of NASDAQ 100 related products will be in a very low liquid environment on Monday, as it is Labor Day and the United States. Furthermore, the fact that we sold off so hard on Friday is a sign that people have no interest in trying to hang on to risk assets over the course of the three-day weekend. That says more than I can, and it certainly does not say anything good for this market going forward. Fading rallies continues to be the best way forward in this market.