At the first signs of exhaustion, I’m willing to put a small, short position on and add to it as we have seen quite a bit of this is selling.
- The NASDAQ 100 has rallied again during the trading session on Friday as the US dollar started to lose strength.
- We are now testing the 50-Day EMA and the NASDAQ 100, which is near the 12,600 level.
- This is an area that I think could continue to be important, but quite frankly I think it’s probably only a matter of time before the sellers come back.
Whether or not that is going to be Monday might be a different story, but now I think it’s very unlikely that we will see emulation of the upside, lease for any significant amount of time. At the first signs of exhaustion, I’m willing to put a small, short position on and add to it as we have seen quite a bit of this is selling. You also need to be cautious about your position size since a lot of people will jump into the bear market rally, and they do tend to be rather vicious.
Wait for an Opportunity to Start Selling
If we can break above the 50-Day EMA, then it’s possible that we could investigate the 200-Day EMA. The 13,500 level is also a barrier, so it’s not really until we break above all that noise that I would consider going long. In general, I think this is a situation where if you are patient enough, you should get the opportunity to start selling. The candlestick that formed during the Friday session was rather bullish, but at the end of the day we still have a lot of concerns when it comes to the idea of risk appetite, especially with the interest rates being so bullish as of late. Yes, we will have the occasional bear market rally in this market and of course rates will drop occasionally, but the overall outlook should continue to be the same.
The area recently bounced from the 12,000 level, and if we can break through that level, then it’s likely we could go down to the 11,000 level. In general, this is a market that I think if you get an exhaustion candle you can probably get involved but I would not be interested in buying here, because I recognize that the fundamental situation still does not favor the upside, please not yet.