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If I believe this market will fall, I will buy puts, but that is as aggressive as I will get to the downside.
The NASDAQ 100 pulled back during the early hours on Monday but then turned around to show signs of life as the 200-day EMA offered support. The market now looks as if it is trying to figure out where it wants to go longer term, and we are going to perhaps attempt to break the 15,000 level. If we can get above there, then the market is likely to continue going much higher.
The market has been very volatile and strong to the upside, and it is likely that we will continue to see buyers getting long of the market every time there is a dip because that is what they are conditioned to do. Indices such as the NASDAQ 100 are not meant to fall over the longer term, so it will be interesting to see how this plays out. After all, the bond market has recently been suggesting that there is a whole slew of interest rate hikes coming, so Wall Street clearly does not believe that the Federal Reserve is going to tighten monetary policy as the bond market does. Because of this, we are about to have something rather drastic happen because one of the sides will win the argument.
Keep in mind that the NASDAQ 100 is driven by a handful of stocks and can probably be called the “NASDAQ 7.” Pay attention to Tesla, Microsoft, Alphabet, and others of that size to determine where this market goes overall. After all, this is a market cap-weighted index, meaning that the biggest stocks move the most. In this scenario, it is very likely that we will see more upward pressure than anything else, so I think that a lot of traders are going to be looking to make up for the lost time.
Regardless of the economy, or the general economic situation around the world, it appears that Wall Street is looking through all of this, which is one of the things that are best. This is why I normally do not short indices, and after this most recent run higher, I am going back to that strategy. If I believe this market will fall, I will buy puts, but that is as aggressive as I will get to the downside.
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