The NASDAQ 100 has broken above a major resistance barrier during the month of February, only to turn around and show signs of weakness. Because of this, it now looks and see if we may be getting ready to pull back in the NASDAQ 100, and certainly volatility is going to continue through the month of March. The market formed a couple of exhaustion candles just below the 13,000 level in the middle of the month of February, and now it looks like we may pull back a bit into the previous consolidation area that had been a focus of the market early this year.
You can also make an argument for a “W pattern” that formed at roughly 10,750. I suspect that what we are going to do for the month of March is dropped toward that area, but I don’t necessarily know that we get a huge selloff. I anticipate that Wall Street will do everything it can to ignore the economy and come up with narratives about the Federal Reserve flooding the market with liquidity. After all, the last 14 years have been nothing but Federal Reserve liquidity, and a complete ignoring of economic conditions by most traders.
- What has me somewhat negative for the month of March is not necessarily the chart itself, but the fact that bond yields in America continue to rise.
- This is toxic for stocks, especially as a lot of traders are starting to become more interested in owning bonds with guaranteed higher yields than gambling in the stock market.
- This is not to say that we are even necessarily going to break down below that support, but if we were to break down below the 10,750 level, it’s more likely than not that the NASDAQ 100 will go reaching towards the 10,000 level.
So far, the market will continue to focus on the short-term volatility of the airing season, but the real argument will be with the bond market I suspect that will continue to be very noisy during the month of March. Furthermore, we almost certainly will have at least a 25 basis point rate hike in the month of March, but there are people out there who are trying to price in the idea of 50 basis points now, so expect more volatility with more of a downward slant.