The Nasdaq 100 traded slightly above the 23,700.00 apex momentarily yesterday, testing late July records highs. In early futures trading this morning the index is near 23,560.00 with fast conditions.
It would be easy to point to yesterday’s highs in the Nasdaq 100 and say the famed index continues to show signs of marching upwards. But it is important to point out the stark difference in reality for day traders compared to long-term investors. Day traders who are using leverage when they pursue the Nasdaq 100 are often hurt because of violent fast reversals. Saying the Nasdaq 100 is going up and will continue to break records over the mid-term is rather easy, but can also be costly for those who do not use risk management.
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Taking advantage of climbs higher for speculators is immensely difficult if they are overly leveraged and cannot hold on to positions for anything more than a handful of hours. While technical traders may also be betting on intraday reversals lower and profiting, many traders are simply trying to ride the tide that is lifting the Nasdaq 100 upwards on a rather consistent basis.
Record Levels Retested and Fear of Reversals
As of this writing the Nasdaq 100 is around 23,561.00 in futures markets. Yesterday’s high which toppled the 23,700.00 again like it did in late July was celebrated as a bullish signal. Mid and long-term traders are able to simply close their eyes and walk away after purchasing the Nasdaq 100 and let the index do its work. Day traders were served another reminder sudden storm lower can wipe them out however.
Thursday’s move lower last week produced a low of nearly 23,200.00, this after touching a high around the 23,560.00 mark beforehand. Use of too much leverage by day traders makes these type of moves particularly costly if their pockets are not deep enough to withstand losses and margin calls. The point is that to profit from the record highs on the Nasdaq 100 and play a longer game, less leverage has to be used and enough money in an account is needed to withstand turbulent rides. Buying near durable support levels also helps when perceived accurately.
Today’s Inflation Data and Trading
The U.S will release CPI data later today which will effect broad market conditions including the Nasdaq 100. The belief that the Federal Reserve is now going to cut interest rates in September is being embraced.
- An inflation number that meets expectations today could fuel more speculative buying on the Nasdaq 100.
- Traders however should be careful around the CPI report release.
- Large players in the cash market will cause volatility, including reversal.
- The fact that yesterday’s price action in the Nasdaq 100 challenged all-time highs and then reversed lower is a sign that risk appetite remains high, but is practicing caution.
Nasdaq 100 Short-Term Outlook:
Current Resistance: 23,575.00
Current Support: 23,535.00
High Target: 23,685.00
Low Target: 23,470.00
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