The NASDAQ 100 continues to try and recover during the month of January, and at the time of writing it seems like everybody’s bullish again. However, when you step out and look at the charts, you can see that we saw the long way to go before we change the overall attitude of markets. With that in mind, I’m looking at the downtrend line as the first major barrier on this chart, and it’s worth noting that we pulled back from that level.
It’s also worth noting that Microsoft came out and gave a horrible guidance report, which obviously would have a major influence on the NASDAQ 100 as it’s one of the world’s largest technology companies. The 200-Week EMA sits right around the 11,600 level, and we formed a bit of a “double bottom at the 10,650 level. In other words, we are most certainly sitting right around an area that you would expect a little bit of a bounce, and that’s what we have gotten.
- The first thing that comes to mind when I think about February is that the Federal Reserve has an interest rate decision on February 1, which should be an interest rate hike.
- The question now is whether or not it is 25 basis points or 50, because for some reason Wall Street has got it in their head it’s only going to be 25.
- Whether or not that’s true is not necessarily important, because the Federal Reserve is going to stay tight for the foreseeable future.
This is something that Wall Street refuses to believe, and I think at this point in time the Federal Reserve has to worry about its own credibility. In other words, they do not want a repeat of the 1970s where they loosened monetary policy too quickly. Beyond that, the jig is up, as Federal Reserve governors are no longer allowed to day trade the markets. They don’t have any vested interest in keeping the monetary policy loose at this point.
On the other hand, if we can break above the 11,800 level, we could to begin a move higher, but it almost certainly would involve some type of turnaround by the Federal Reserve, something that they swear up and down is it happening anytime soon.