Index Continues to Look Vulnerable

I do recognize that we can have the occasional bear market rally, and this can be vicious, but at the end of the day it should just end up a selling opportunity.

The NASDAQ 100 rallied ever so slightly heading into the weekend, but at this point it looks as if it is going to continue to see downward pressure. Even though it was the largest options expiration in history, it was not enough to move the markets drastically. In other words, nobody’s interested in buying this market, and at this point rallies should continue to be sold into.

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If we break down below the low of the Thursday candlestick, it opens up a move down to the 10,800 level. After that, we could go much lower, but I think this is a situation where we are seeing quite a bit of concern around the world when it comes to interest rates rising, and because of this it’s likely to continue to see a lot of downward pressure on risk appetite as well. Ultimately, this is a market that should see plenty of volatility, but I think ultimately this is a situation that until we get a change in the overall attitude of the Federal Reserve, it’s difficult to imagine how this market takes off.

We are certainly in a major downtrend, so it’s going to be difficult to fight it. That being said, we are getting relatively close to a larger support level on longer-term charts, so you should pay close attention to that. I think at this point we are going to continue to see a lot of nerves out there, and of course, technology stocks tend to perform very poorly in a rising interest rate environment.

That being said, it is probably only a matter of time before the Federal Reserve realizes that it is tightening into a slowdown and will probably have to turn around. Because of this, it’s very likely that we will see continued downward pressure until Jerome Powell gives in. As the Federal Reserve has already stated that they are going to do 50-basis point interest rate hikes over the next couple of meetings, we should continue to see misery in this market. It would take a move above the €12,800 level to change the attitude, which is just above the 50-day EMA. I do recognize that we can have the occasional bear market rally, and this can be vicious, but at the end of the day it should just end up a selling opportunity.