- The NASDAQ 100 fell significantly during the trading session on Tuesday, as we have seen a lot of volatility as of late.
- That being said, the market is probably just a bit overbought at this point, so that pullback that we have seen early during the day on Tuesday will almost certainly offer some type of buying opportunity and what has been an extraordinarily strong uptrend.
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Remember, this is a market that continues to see a handful of stocks move everything, as the NASDAQ 100 is not an equal weighted index. It’s the same 7 or 8 stocks that everybody else owns that will move this market and therefore you need to pay attention to all of the usual technology stock such as Microsoft, Tesla, etc. As long as those rise, it’s only a matter of time before the NASDAQ 100 rises right along with them.
The 50-Day EMA sits underneath the recent consolidation and I think it does offer a significant amount of support. In fact, that might end up being the “floor in the market” in the short term, and I do think that eventually we go looking to the 16,000 level yet again, an area that we tested during the previous session. Once we clear 16,000, it’s very likely that the market will continue to go much higher, breaking out to a fresh, new high.
Eyes on Federal Reserve and a Potential 'Santa Claus Rally'
Despite the fact that economic numbers aren’t necessarily great at the moment, the reality is that the market is running on pure momentum right now, and it seems like every opportunity that traders get to buy stocks “on the cheap”, they are doing exactly that, thereby making this more or less a “FOMO market.” That is one of the big reasons why people trade the NASDAQ 100, because it’s all about momentum, not necessarily a lot to do with fundamentals. We have recently seen some of the larger technology companies do reasonably well in the earnings season, so that does make an opportunity present in any pullback.
Traders are starting to bet on the Federal Reserve loosening its monetary policy, and that has been driving stocks much higher. The NASDAQ 100 is especially sensitive to interest rates, so if they continue to drop, it’s likely that we will see the NASDAQ 100 take off like a rocket, which is exactly what it’s done for the last couple of weeks. Furthermore, we have the possibility of the so-called “Santa Claus rally” presenting itself as well.
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