Potential signal:
- I am buying here, with a stop at 28,500 and a target of 31,000.
The Nasdaq 100 fell right off the bat during the trading session on Wednesday as the Americans have attacked the Iranians again. That being said, we've seen a nice bounce since then, and support has held at a crucial level. We have to ask the question now whether or not there is anything to this move, or if it is just more noise. The overall attitude of the market has been somewhat sideways for a while, and it's worth noting that the 28,500 level has been very important for support.
Technical Levels
We have been using the 50-day EMA as support, and even though we broke down through it at one point during the trading session, turning around and showing signs of life does suggest that perhaps even though we have broken down through something that's been reliable support, we've seen enough buyers coming back in to change the way to read this market. Recent market behavior has been very sideways, but that makes sense after shooting straight up in the air for several months, and now you have to work off some of the froth. The 28,500 level has been reliable, just as the 50-day EMA had been, but at this point in time, it's worth noting that the market seems to find buyers on dips, and it seems to be very attracted to the 30,000 level. If we were to see momentum jump into the market and really push this thing to the upside, then one would have to think sooner or later we would challenge that level, perhaps even break above it like we have a few times in the past.
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Middle East Volatility and the Artificial Intelligence Baseline
The problem that we run into is that the Americans attacking the Iranians suggests that perhaps the situation in the Middle East is still very fluid, and it is still something that could be very difficult to come to terms with. The market will continue to have the backdrop of fear due to the potential of a random headline shaking things up, but I also recognize that this is a market that, from a longer-term perspective, still has plenty of people willing to get involved. This is a market that many will simply just buy and hold, and passive investing will continue to look at the NASDAQ as a place to be.
Bigger Concerns
One of the biggest concerns we have right now is the artificial intelligence trade. The alternative scenario is that the artificial intelligence trade really comes apart and starts to drag the broader index down with it, but I think the fact that we continue to hear headlines about the artificial intelligence trade unwinding suggests that maybe it's not as big of a deal as we fear. After all, it's normally long after the fact when you hear the headline talking about what exactly has moved the market. I believe at this point in time we remain very sideways, and I think both buyers and sellers can make an argument here, but at the end of the day we are still very much in an uptrend, so despite the fact that you would anticipate a lot of noise over the next several weeks as we are in the dead of summer, the reality is the onus is still on the bears. Until we see something different as far as the fundamentals are concerned, I suspect there will be a lot of choppiness, but the trend is still looking intact for what that is worth.
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