If interest rates start to shoot higher, then it almost certainly will work against the value of the NASDAQ 100.

The NASDAQ 100 did not do too much during the trading session on Thursday, gaining 1%. It was a relatively positive day, but it’s also worth noting that the Chairman of the Federal Reserve speaks Friday morning at the Jackson Hole Symposium, and traders around the world are trying to figure out whether the Federal Reserve is looking to ease its monetary policy.

Inflation data does not suggest that they should be doing that, but the Federal Reserve has created this monster. After all, they have had a long history of making sure Wall Street gets paid, via cheap money. Now that Federal Reserve governors are not allowed to actively trade in the markets, they may not be as inclined. They have created a generation of traders that have no idea what it’s like to trade in an inflationary environment, or trade without the Federal Reserve looking to bail everybody out at the first sign of trouble. In other words, the markets have been so distorted for the last 14 years that it’s difficult to see how we get out of that machine.

Traders Waiting for Jackson Hole Symposium

• Nonetheless, after he speaks during the session on Friday, if we break down below the 50-Day EMA, then it’s possible that the NASDAQ 100 drops to the 13,000 level, possibly even the 12,000 level.
• On the upside, the 13,500 level is an area that has offered resistance previously, so it’s possible that we could see that as a short-term ceiling. If we were to break above there, then that could change things, turning the market into more of a “buy-and-hold” type of situation.
• If that happens, the market is likely to go looking to the 15,000 level. That would also see certain stocks such as Tesla, Amazon, Microsoft, and the like going higher.

If interest rates start to shoot higher, then it almost certainly will work against the value of the NASDAQ 100, and it’s also probably worth noting that we have recently pulled back from roughly the 50% Fibonacci level. This is a market that I think continues to see a lot of volatility, and I’m almost positive Jerome Powell do something to mess this entire situation up one way or the other. Because of this, be cautious about your position size, and recognize that you will need to be very flexible.

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The NASDAQ 100 initially tried to rally on Tuesday but continues to see a bit of trouble. The 13,000 level has offered resistance, and at this point, it’s likely that we will continue to see a lot of “market memory” in this area, as it has been an area of both support and resistance multiple times over the last several years.

Now the market is sitting on the 50-Day EMA, and if we break down below the 50-Day EMA, then we could see a continuation to the downside, reaching the 12,500 level, possibly even the 12,000 level after that. Keep in mind that the NASDAQ 100 is only driven by a handful of stocks, so we will have to pay close attention to the company such as Tesla, Amazon, Alphabet, Microsoft, and the like. It’s also worth noting that the NASDAQ 100 is highly sensitive to interest rates, so pay close attention to the 10-year note. If interest rates continue to rally, that will have a negative effect on this market given enough time.

Market Waiting for Central Bankers Symposium

• Central bankers are speaking to Jackson Hole this week, and that could give market participants a bit of a “heads up” as to where monetary policy is going.
• That’s a bit surprising to say because the Federal Reserve and other central bankers have discussed the need to type monetary policy in order to fight inflation repeatedly.  However, it’s worth noting that Wall Street is currently at the end of a 14-year stretch of easy money, as the Federal Reserve has done everything it can to prop up its friends on Wall Street.
• The Federal Reserve officials don’t day trade anymore, so perhaps they will actually let it go.

It’s not until we make a fresh, new high that we would see this market go higher, perhaps reaching the 15,000 level. That would take quite a bit of momentum, so at this point in time I suspect is easier for this market to pull back in the short term. However, we will have to see where we end up at the end of the week before we get any type of serious clarity. In the meantime, keep very calm, and make sure that you are not overtrading nor are you using huge positions.

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The NASDAQ 100 has fallen hard during the trading session on Monday, as we continue to see a lot of negativity. The 50-Day EMA is currently rising higher, and it should show a certain amount of support. However, if we break through there, then the next target will more likely than not end up being the 12,500 level.

The NASDAQ 100 of course is very susceptible to noise as there are only 7 stocks that move the thing for the most part, so you would do well to follow Tesla, Apple, Microsoft, Alphabet, and all of the usual suspects. As interest rates continue to show signs of strength and central banks around the world look to be very tight with monetary policy, that does tend to work against the value of these types of companies, so it all ties in together quite nicely. It’s also worth noting that we close at the very bottom of the candlestick, so it looks like we are ready to test the major support level in the form of the 50 Day EMA and the previous noise between there and the 12,500 level.

Strategies for trading Nasdaq today

If we were to break down below that level, then it’s likely that the market could go to the 12,000 level. On the other hand, if we were to turn around and reach higher, the 200 Day EMA sits just below the 13,500 level, and therefore it should offer a bit of resistance, therefore I think it’ll take a lot of effort to get above there. If we can break above all of them, then fine, we will go much higher. This week should be crucial for the markets, and by the time we take off for the weekend, we should have a good idea as to where things are going to end up.

• I would anticipate a lot of noise more than anything else, so be aware of the fact that the markets are going to be difficult to navigate going forward.
• We continue to see a lot of headline noise cause headaches for most traders.
• The next couple of days are going to be difficult and crucial, so make sure you keep your position size reasonable.
• I do believe the we will get a longer-term answer, but we need to let the market tell us what it wants to do.

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Expect a lot of volatility going forward as we have seen getting here.

• The NASDAQ 100 Index was very volatile on Tuesday as we had no real certainty by the end of the day.
• The market has been all over the place, so it does make a certain amount of sense that there are a lot of anxieties at the moment.
• The market has previously been on fire, so it’s interesting to suggest that we are at a major inflection point.

Important Candlestick Wednesday

The market has recently broken above a major resistance barrier in the form of the 13,500 level, so it certainly makes quite a bit of sense that it is offering a short-term support level. That’s exactly what we saw during the trading session on Tuesday, as we plunged lower only to see buyers step in and pick the market back up. By the end of the day, we were essentially unchanged, so it’s difficult to read much from this candlestick. It is because of this that I believe the Wednesday candlestick is probably going to be one of the most important ones over the last couple of months.

If we break above the top of the candlestick, then it’s possible that we could go looking to the 200-day EMA, which is currently right around the 14,065 level. After that, we have a significant amount of resistance at the 14,250 level, and that probably makes a significant target for those willing to get bullish at this point. On the other hand, if we break down below the bottom of the candlestick for the day, we could go lower to look toward the 13,000 level, an area where I expect to see a lot of support at based on “market memory”, as there was a lot of resistance in that general vicinity.

Keep in mind that the NASDAQ 100 is led by just a handful of companies, so you could probably call it the “NASDAQ 7″ or so. Pay attention to all the usual actors such as Tesla, Microsoft, Alphabet, and the like. If they are rising, this index will rise right along with them. On the other hand, if they have a rough go, then we will see this market pullback to that 13,000 level. Either way, expect a lot of volatility going forward as we have seen getting here.

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It’s very difficult to trade other than to simply “chase the market.”

• The NASDAQ 100 Index rallied yet again on Monday to show that the markets are ready to continue ripping toward the 200-day EMA.
• Fundamentally, there’s no reason whatsoever that the NASDAQ 100 should be powering higher the way it is, but at the end of the day, the markets have changed so much over the last 14 years that they have lost grip with economic reality.
• This should not be a surprise, because the Federal Reserve has caused this problem.

Plenty of Liquidity

Markets run on liquidity and nothing else. As long as there is going to be plenty of liquidity, people throw money at risk assets because there’s nothing else to do. Bond markets don’t pay much in yield, so they have to find a way to make money. They do this by purchasing some of the worst stocks on the planet, in what would be “good times”, and go back to the major companies in times that are a bit riskier.

Keep in mind that the NASDAQ 100 is controlled by about 7 major companies, so this is the same thing as making a bet on Tesla, Microsoft, Amazon, and a few others. This is not 100 stocks, it’s more like 7 stocks and 93 other things to look at. As long as money is going to go flying into those big companies, this market will continue higher.

Ignore the fact that the world is going into a recession, ignore the fact that a lot of pundits can pull out charts showing you just how miserable economic conditions are. Until Wall Street gets it through its head that there is a serious risk, we will continue to see more of this mentality play out. Because of this, it’s very difficult to trade other than to simply “chase the market.” In that scenario, you need to be very cautious about your position size, because someday somebody is going to look around and realize how bad the true economy is. If the Federal Reserve is in fact going to have to fight an 8.5% year-over-year inflation situation, that’s not good for stocks. However, Wall Street does not seem to know that right now, so you can’t fight the tape. It’s very likely we go looking to reach the 14,250 level over the next several days.

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Given enough time, I do think we will have a wicked pullback, but if we break above the 13,500 level, that opens up the gates for even more rallies.

• The NASDAQ 100 Index rallied a bit again on Friday as we continue to see the market “climb the wall of worry.” 
• After all, the market will continue to see a lot of noisy behavior, and therefore volatility. It is a difficult market to hold onto, but for those that have, they have been rewarded.

The 13,500 level above is likely to be a significant barrier, just as we had seen during the trading session on Thursday. Ultimately, if the market were to struggle in this area, then it’s likely that the market would struggle a bit of the time to try to get above there. On the other hand, if we break down below the massive red candlestick from the trading session on Thursday, then I think we have a pullback to the 13,000 level just waiting to happen.

Federal Reserve at the Center

Unfortunately, this will have nothing to do with the companies or the economy. Everything is going to be about the Federal Reserve and the idea of what they will be doing as far as interest rates. The Federal Reserve still swears up and down that they are going to do whatever they can to fight inflation, which is the same thing as saying they are going to keep monetary policy tight. However, Wall Street has run with the narrative that they are going to have to be less restrictive with monetary policy due to the fact that inflation has slowed a bit. However, it’s unfortunately still much above the Federal Reserve target rate, which is 2%. In fact, inflation is still roaring at 8.5% year-over-year, so it does make a certain amount of sense that we would see tight monetary policy going forward.

At this point, you can take a look at the 10-year yield in the United States to see how things play out for the stock market overall. If we see a sudden sharpening in rates, that would be negative for stocks. At the moment, the falling rates have propelled the market to the upside, but the reality is that the rates are falling because a lot of bond buyers are preparing for a recession. That obviously is not good for the market as well. Given enough time, I do think we will have a wicked pullback, but if we break above the 13,500 level, that opens up the gates for even more rallies. The average bear market rally is roughly 21%, which is just where we happen to be at.

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More confusion is ahead but it certainly looks as if we have a major resistance barrier just above that should be paid close attention to.

• The NASDAQ 100 index rallied a bit during the session again on Tuesday, but just as we had seen on Monday, the 13,000 level seems a bit too much for the market to overcome.
• Because of this, I think it’s probably only a matter of time before we get a bit of a pullback.
• However, if we were to go on the opposite direction it would certainly make a huge statement.

Two shooting stars in a row is generally a very negative sign, but if we were to break above the heights of the last couple of days, that would almost certainly be an explosive move to the upside just waiting to happen. At that point, I would anticipate that the NASDAQ 100 will go looking to reach the 13,500 level, an area that has seen a lot of noise in the past. That being said, anything above there would be a massive trend change. We have certainly seen a nice rally over the last couple of weeks, but we have suddenly hit a huge brick wall.

NFP Announcement Will Determine Direction

It’s worth noting that Friday is the Non-Farm Payroll announcement, and that will have a major influence on where we go next. After all, traders starting to focus on the possibility that the Federal Reserve is about to pivot, meaning that they will have an easing monetary policy. That is the case, despite the fact that the Federal Reserve has had a couple of members come out and explicitly say that the market has it wrong. Regardless, the market will do whatever the market does, so pay close attention to the area that we seemingly cannot break above. If we do, it may act as a “beach ball held under water”, meaning that it could shoot straight up in the air.

More likely than not, we can get a bit of a pullback, and perhaps try to get down to the 12,500 level. Friday will have a huge impact on the markets, because if it looks like the Federal Reserve will have to do whatever it can to tame inflation because of job growth, which in and of itself could be a bad thing as well. In other words, more confusion is ahead but it certainly looks as if we have a major resistance barrier just above that should be paid close attention to.

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We are essentially watching a game of “chicken” being played out between Wall Street and the Federal Reserve.

• The NASDAQ 100 trying to break out Monday but seems to be struggling with the idea of breaking above the 13,000 level.
• It was a very choppy and noisy session, as we continue to try to figure out where we are going next.
• There is a big argument right now between the possibility that the Federal Reserve is going to pivot, and what seems to be reality from an inflation basis.

What’s Happening with Wall Street?

The Federal Reserve has had a couple of actors come out and suggest that perhaps they are going to continue to tighten, and that should be bad for the NASDAQ. However, Wall Street doesn’t believe this and that makes a certain amount of sense due to the fact that almost everybody on Wall Street has yet to trade an inflationary environment. Keep in mind that the average money manager wasn’t even around during the Great Financial Crisis. In other words, this is all new to them, and they’ve been raised to believe that the Federal Reserve will do whatever it takes to save them.

Whether or not that ends up being the case is a completely different question, but this is a major problem that the Federal Reserve itself has created. After all, you cannot continually bail out Wall Street and expect them to behave any differently. In that vein, it’s worth noting that the market is doing what it’s always done, trying to front-run what the Federal Reserve may do to save them. The real question is whether or not they know how to deal with the economy itself. The economy and the stock market have become so far from the reality of each other that if we actually traded based upon fundamentals, it’s kind of scary where we may end up.

That being said, this is the market that we are stuck with, so it’s all about monetary flow. It’s not about earnings, it’s not about the health of the economy, it’s about free and cheap money for Wall Street. If they have it, then it’s a party. However, if they do not have it, then we sell off. It’s been that simple for 13 years, and I don’t know that it changes anytime soon. We are essentially watching a game of “chicken” being played out between Wall Street and the Federal Reserve.

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The NASDAQ 100 has gone back and forth during the bulk of the trading session on Thursday, which should not be a huge surprise considering that it was the end of the month’s rebalancing. Nothing has changed from a fundamental standpoint, so a lot of what we had seen during the trading session should be thought of as noise. That being said, the market could very well get a little bit of a bounce heading into the weekend, but I would anticipate that the 12,000 level is probably a bit too much to overcome.

When I look at this chart, I recognize that the 50 Day EMA above will continue to cause issues, and now that it is approaching the 12,000 level, I think that the previous selling and the indicator may come into the picture to cause even more downward pressure. If we were to break above there, then the NASDAQ 100 could very well go looking to reach the 13,000 level, where I see even more structural resistance.

On the other hand, if we were to break down below the 11,000 level, that could open up the trap door to send the NASDAQ 100 down to the 10,000 level given enough time. I do think that this is a market that will continue to get hammered from time to time due to interest rate fluctuations, but right now I just don’t see any reason to chase this market to the upside. This still remains a “fade the rallies” type of market, just as the rest of the indices do. Unless the Federal Reserve changes its tune completely, it’s difficult to envision this market truly picking up its feet and kicking off a new uptrend.

At this point, I think we continue to see a lot of fear and concern out there, and of course, as per usual, you will have to pay attention to the “generals” when it comes to the NASDAQ 100. That’s Tesla, Facebook (Meta), Apple, Amazon, and so on. Unless those markets suddenly start to perk up, it’s almost impossible for the NASDAQ 100 to show any real strength. Ultimately, this is a market that is going to follow right along with interest rates, and a handful of stocks. Fading rallies until we break above the 200 Day EMA is probably the soundest of strategies that I know right now.

It is very likely that we will see more malaise in this market during the course of summer, so I believe that you will probably see a lot of a “sell the rallies” type of attitude.

The NASDAQ 100 continued to struggle yet again in the month of June, and it’s very likely that July will show a bit of the same. However, we are approaching an area that could offer a bit of support, especially near the 10,500 level. It is because of this that I believe that the NASDAQ 100 may stabilize a bit for the month of July, perhaps consolidating and trying to work off some of the excess selling pressure. The market has been eviscerated because the Federal Reserve has no other choice but to tighten rather aggressively.

When you look at this chart, you can see that the market is hanging near the 200-week EMA, is therefore there could be a bit of technical support here as well. This is a market that I think goes back-and-forth during the month of July, but probably has more of a tilt to the downside. After all, the monetary policy is not going to work in favor of the NASDAQ, and by extension, the NASDAQ 100.

However, there is only so far that the market can fall, and I believe that there will be a lot of support to be found near the 10,500 level, so if we were to break below there the next target would be the 10,000 handle, which is a large, round, psychologically significant figure, and an area where we had seen resistance previously. As per usual, you will have to watch all of the major technology companies such as Meta, Tesla, Microsoft, Amazon, etc.

If those major corporations continue to get sold off, there’s almost no chance that the NASDAQ 100 will be able to take off. However, if some of the bigger technology companies do start to pick up a bit of a bid, maybe just due to the fact that they have gotten “cheap”, that would be the bullish case for the NASDAQ 100. However, it is very likely that we will see more malaise in this market during the course of summer, so I believe that you will probably see a lot of a “sell the rallies” type of attitude. It is not until we break above the 13,500 level that I believe the market has turned around enough to believe, something that I just don’t see happening.