The NASDAQ 100 has been on an absolute tear to the outside recently, and it looks as if the market is going to continue to find plenty of reasons to be bullish, mainly due to the idea of liquidity. However, it’s probably worth noting that we are getting a bit stretched at the end of the month in May, so I do anticipate that we will eventually have a bit of a selloff. That selloff could present some opportunities.
I recognize that the stock market and the economy are completely divorced from each other at the moment, and I don’t know that it’s going to change anytime soon. After all, Wall Street is more worried about cheap liquidity coming out of the Federal Reserve than anything else. Yes, there is probably a reckoning coming, and we have seen moves like this in 1999, 2001, and 2008 previously. You get some type of massive bounce, and then a significant selloff.
Earnings be damned, this seems to be a market that’s willing to look past all of that, although a couple of companies have come out with strong statements. However, the latest bubble, artificial intelligence, is probably something that’s being overdone. That’s the job of Wall Street, to sell stocks to you, and in order to do so they come up with a narrative. At one point, it was all things related to blockchain. Going back far enough, it was everything that had a “.com” in its name, as we started to see the Internet take off. Now it’s all about artificial intelligence. The question is whether or not artificial intelligence is something that can drive the entire economy. It’s not that AI won’t be a big part of our lives down the road, it’s just that you are probably asking quite a bit for this to sustain its momentum.
Technical Outlook
- As the charts look, I suspect that a move toward the 13,750 level could be in the cards, and perhaps even down to the 13,500 level.
- In that area, I would anticipate that a lot of “FOMO traders” will reenter the market.
- If the market breaks down below the 50-Week EMA, presently just below the 13,000 level, we could see a further selloff at this point, perhaps driving this market down to the 12,000 level next.
In general, indices are manipulated to the upside, based upon how they are not equal weighted. Remember, it’s just 7 stocks that move this index at the end of the day.
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