- The NASDAQ 100 has rally a bit during the trading session on Wednesday but ran into trouble as soon as they got to the 50-Day EMA.
- Because of this, the market looks as if we are going to continue to struggle, and therefore I like the idea of feeding rallies.
- The market is likely to continue to see a scenario where risk is definitely something that you need to be cautious with, and it’s also running on a motion more than anything else at this point.
High Volatility in the Stock Markets
During the day, the Bank of Canada raised interest rates by 50 basis points. The expected move was for 75 basis points, but by doing less than expected, this has people thinking that perhaps the Federal Reserve will follow suit. Obviously, that’s nonsense, but you’d be surprised at how little it takes to move the market, especially when volatility is as high as it has been as of late.
When you look at this chart, you can see that we have formed a less than desirable candlestick, and it’s likely that we could swap that down to the 11,000 level at the first signs of trouble. Ultimately, the market has been in a significant downtrend, and that has not changed, despite the fact that the market has been very volatile. However, if we were to turn around a break above the 50-Day EMA, then it’s possible that we could see a shot higher. I don’t necessarily think that we are going to have that happen, but it is possible. If that were going to be the case, then we could go looking to the 12,000 level.
Ultimately, I think this is a situation where you are looking to fade rallies, at least at the first signs of exhaustion. Because of this, I do think that we will eventually try to reach the bottom again, especially if the Federal Reserve is going to continue to see the need to tighten monetary policy, as inflation is so out of control. The current inflation numbers in the United States or above 8%, so the Federal Reserve is not going to change its monetary policy anytime soon. Ultimately, this is a market that I think continues to be shaky at best, which does not typically lend itself to see moves higher, at least not sustainably.
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