The NASDAQ 100 finished out last week hanging about the 11,000 level, which is an area that has a certain amount of psychology attached to it, as well as an area that previously has been important. Because of this, it looks as if the market may be looking for a bottom, although it’ll be interesting to see if traders are willing to put any real money to work this week as we are between Christmas and New Year’s Day.
Quite frankly, the most likely outcome is going to be a choppy and sideways week, and it’s probably worth noting that the underlying index was closed for the session on Monday. A lot of markets will continue to look at this through the prism of waiting to see what happens with the jobs report, and therefore I think we are more likely than not going to see more of that kind of stagnant trading. However, keep in mind that illiquid markets can move quite rapidly if surprise news hits the wires. In that environment, I would fully anticipate that the market will probably see a lot of volatility. However, if things stay relatively calm as far as news is concerned, we could very well have been unchanged for a week.
Position Sizing Will be Crucial
- Most professional traders are away for the week, and most large trading desks are manned by junior traders. Their job isn’t necessarily going to be putting on new positions but protecting ones that already exist.
- Furthermore, we have had the end-of-year padding of the books, so more likely than not what we will see is a drift in aimless trading.
- The market will continue to be very hesitant to make big moves until we get the Non-Farm Payroll numbers out of the way.
Until then, position sizing will be crucial because you could run into a situation where a sudden shock to the markets could have drastic consequences it’s worth noting that the 10,500 level seems to be particularly interesting for support, I think a lot of people will be looking at that as a potential “bottom in the market.” Whether or not that holds is a completely different question, of course, so keep that level in the back of your mind. I for one believe that we are still in a situation where most rallies will be sold into.
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