- The Nasdaq 100 initially did fall pretty significantly overnight in Asian trading, but it’s probably worth noting that the last couple of times we've seen the headlines cross the wire where US debt was downgraded, it's all been the same downgrade.
- So overnight, I think there was a bit of an overreaction and as traders came back on board, especially when we got close to the New York opening, suddenly things changed.
- And as a result, we have formed a hammer that sits right on top of the 21,000 region. The 21,000 region is of course an area that's been important in the past.
And therefore, I think on these dips, you will continue to see value hunters, even if we broke down below the 21,000 level. I don't really think the downside has that much distance to make. We at the most, I think, would drop to the 20,000 level.
20,000 Continues to be Interesting
Speaking of 20,000, it's interesting to pay close attention to the idea that we are getting the 50 day EMA and the 200 day EMA both approaching the 20,000 level, as well as getting ready to cross and kick off the so-called golden cross.
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In other words, don’t trade what you think because there are plenty of reasons to think that we may struggle. Trade what you see. Markets don't do what they're supposed to do. They do what they do. That's the lesson here. Yes, it's overbought, but it was also oversold. So, we have to find some type of equilibrium. But as long as traders continue to see hope for a decent trade negotiation between America and everybody else, the Nasdaq 100 will probably have buyers. This is essentially “ground zero” for risk appetite at the moment and should continue to be.
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