NASDAQ (NDQ): Bounce Or Die
Anyone with two eyes can see price action is absolutely dreadful.
We have seen rejection after rejection. War is still raging, FED still hasn't done anything, and the market is begging to be saved.
This analysis is basically going to be a hedge against my bearish bias which I have strongly held for many months now as we have been heading into this unprecedented environment.
Going to go over just a few things as we head into the rest of the week. There will be some hidden gems throughout.
The first thing will be the elephant in the room which is this Monthly candle of Darkness; This candle closes at the end of the week and I suspect the market is going to do everything it can to improve the close of it.
I know usually the strongest move dictates the trend and I do believe the trend is still Bearish (obviously) but a bounce here is very possible.
We have just endured the first series of earnings, they were about what I expected. Just enough to make it by, while Alphabet misses. Now as long as markets don't puke on open tomorrow, I suspect the market will be forward-looking once more, irrationally.
Nothing aside from Nuclear Warefare or Oil catastrophe is going to send the market spirally at this very moment.
Another thing that helps the case for a short-term bounce is the VIX: A really good rule of thumb for good R:R Entry is not when VIX is at support but rather when it is at resistance. VIX has bounced sharply to a zone of interest and there will be one of two outcomes. Breakdown = Bullish or Breakout = VERY Bearish
Also going to mention the DXY. I've been 100% against the crowd every step of the way when it comes to the US Dollar. I believe that money finds itself in the most efficient position at all times, which is why the saying "But there is still sidelined money" is just a complete Myth. This is also fundamentally why DXY has been soaring while everyone has been Bearish on it for months. Holding cash even with inflation at 8% has proven more efficient than holding anything in equity markets over the last 6 months. It is all laid out to understand.
That being said, as I'm still bullish on DXY just based on the number of technical breakouts and the environment we are in, I consider the possibility it sees some consolidation in this area. As money will creep back into assets, DXY will consolidate before any more big moves. This area is very reasonable to predict this.
The last thing I'll mention is the US02Y yield and its correlation with the FED and their decision behind Rates. It has become a belief of mine that Powell or the FED just simply follow the US02Y yield regarding its policy. You can accurately see it based on this chart. Not only this but it is reaching a point of Very Strong resistance after an unprecedented vertical rocket up.
To follow up on the US02Y for just a basic lesson, as the US02Y begins to top and reverse, this means (at least historically) the FED will begin walking back on the Hawkish rhetoric and the FED predicted Rate hikes would have peaked.
Ultimately meaning, markets will rise on this knowing there may be light at the end of the tunnel.
I can completely explain this occurrence logically but what I can't explain is how they fight inflation or avoid a hyperinflationary environment if they reverse policy without actually following through. Not to mention their planned QT.
For now, all I can say is trust the parallels here in the original chart above. The market loves them. Just have to navigate level to level from here on out. If a bounce happens here, it would also confirm the Bullish Divergence on the RSI.
Losing this level spell disaster in my opinion.
Hope this helps!
We have seen rejection after rejection. War is still raging, FED still hasn't done anything, and the market is begging to be saved.
This analysis is basically going to be a hedge against my bearish bias which I have strongly held for many months now as we have been heading into this unprecedented environment.
Going to go over just a few things as we head into the rest of the week. There will be some hidden gems throughout.
The first thing will be the elephant in the room which is this Monthly candle of Darkness; This candle closes at the end of the week and I suspect the market is going to do everything it can to improve the close of it.
I know usually the strongest move dictates the trend and I do believe the trend is still Bearish (obviously) but a bounce here is very possible.
We have just endured the first series of earnings, they were about what I expected. Just enough to make it by, while Alphabet misses. Now as long as markets don't puke on open tomorrow, I suspect the market will be forward-looking once more, irrationally.
Nothing aside from Nuclear Warefare or Oil catastrophe is going to send the market spirally at this very moment.
Another thing that helps the case for a short-term bounce is the VIX: A really good rule of thumb for good R:R Entry is not when VIX is at support but rather when it is at resistance. VIX has bounced sharply to a zone of interest and there will be one of two outcomes. Breakdown = Bullish or Breakout = VERY Bearish
Also going to mention the DXY. I've been 100% against the crowd every step of the way when it comes to the US Dollar. I believe that money finds itself in the most efficient position at all times, which is why the saying "But there is still sidelined money" is just a complete Myth. This is also fundamentally why DXY has been soaring while everyone has been Bearish on it for months. Holding cash even with inflation at 8% has proven more efficient than holding anything in equity markets over the last 6 months. It is all laid out to understand.
That being said, as I'm still bullish on DXY just based on the number of technical breakouts and the environment we are in, I consider the possibility it sees some consolidation in this area. As money will creep back into assets, DXY will consolidate before any more big moves. This area is very reasonable to predict this.
The last thing I'll mention is the US02Y yield and its correlation with the FED and their decision behind Rates. It has become a belief of mine that Powell or the FED just simply follow the US02Y yield regarding its policy. You can accurately see it based on this chart. Not only this but it is reaching a point of Very Strong resistance after an unprecedented vertical rocket up.
To follow up on the US02Y for just a basic lesson, as the US02Y begins to top and reverse, this means (at least historically) the FED will begin walking back on the Hawkish rhetoric and the FED predicted Rate hikes would have peaked.
Ultimately meaning, markets will rise on this knowing there may be light at the end of the tunnel.
I can completely explain this occurrence logically but what I can't explain is how they fight inflation or avoid a hyperinflationary environment if they reverse policy without actually following through. Not to mention their planned QT.
For now, all I can say is trust the parallels here in the original chart above. The market loves them. Just have to navigate level to level from here on out. If a bounce happens here, it would also confirm the Bullish Divergence on the RSI.
Losing this level spell disaster in my opinion.
Hope this helps!
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