Nasdaq 100 - Something feels terribly wrongOver the past few weeks, there were quite a lot of things happening - “the market bottom,” “crypto bottom,” “trend reversal,” and so on and on. Again, people rush to make hastily conclusions as the market turns from extremely bearish to fearful of missing out on the real primary trend reversal. Before the CPI, we came forward when QQQ stopped its decline 0.11$ above our price target of 260$ and said we would abstain from setting a price target and wait for the data to come out.
Yesterday's price action is exactly why we did that. The market participants' desire to see the market go higher after a horrible year of underperformance pumped up the Nasdaq 100 index by 7% before the market closed. However, the reality is that inflation continues rising, despite a small surprise in regard to analysts' expectations yesterday. Indeed, in our opinion, it makes no change for the FED, which will continue to tighten the economy further; merely, it will give it more room not to crash the economy right away.
This development comes as a temporary lifeline to the market, which is still seeing the unwinding of the FTX insolvency issues. The stock market and cryptocurrencies continue to see gains across the board today. Despite that, we can not unnotice that something is still terribly wrong; this applies to both the stock and cryptocurrency markets.
First, yesterday's move continues to be characteristic of the one in the bear market. For example, in the 2020 crash, there were at least three days with a daily range of more than 10% (for NQ1); examples are shown in Illustration 1.02. Second, volume declined dramatically toward the end of yesterday's session. In addition to that, the peg between the USD and Tether continues to be destabilized, despite retracing much of the move. This development worries us as it might foreshadow another “unexpected” event in the cryptocurrency market, which will also inadvertently affect the stock market. Therefore, we voice a word of caution as we are not yet convinced this is the market capitulation everyone has been waiting for. With that being said, we maintain our price target for NQ1! at 10 000$.
Illustration 1.01
The image above shows examples of down and up days during the 2020 crash before the FED cut rates to stop the drop.
Technical analysis - daily time frame
RSI, MACD, and Stochastic all turned bullish with the market bounce. DM+ and DM- performed a bullish crossover. Overall, the daily time frame is bullish; however, the trend is weak.
Illustration 1.02
Illustration 1.02 displays the declining volume prior to yesterday's close, which shows signs of exhaustion. We will pay close attention to whether it will be sufficient in the coming hours/days to sustain the rally.
Technical analysis - weekly time frame
RSI and Stochastic point to the upside. MACD tries to reverse to the upside. DM+ and DM- are all bearish. Overall, the weekly time frame is bearish.
Illustration 1.03
Illustration 1.03 shows a setup for NQ1!; if the price will manage to hold above the level, then it will be bullish for NQ1!.
Illustration 1.04
The above is a link to the article about Tether, which we published during the Luna crash.
Please feel free to express your ideas and thoughts in the comment section.
DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
