I believe that waiting for signs of exhaustion will continue to be the way going forward, as we are still very much in a downtrend.
The NASDAQ 100 has rallied significantly during the trading session on Wednesday, despite the fact that the Federal Reserve raised interest rates by 25 basis points. Regardless, there are a lot of concerns out there although we are probably due for some type of recovery rally. You could even make an argument for a bit of a falling wedge, which is a bullish sign, but we have not broken through the potential downtrend in order to make that happen.
Even if we do rally at this point, I think it is probably only a matter of time before we see sellers, which could open up the possibility of yet another shorting opportunity. I am not willing to short it quite yet, but I do recognize that the 14,000 level might be a bit too much to deal with. The Federal Reserve is more likely than not to continue raising rates, so the market will have to come to grips with that. The biggest problem I see with this index is the fact that the NASDAQ 100 is full of high-growth stocks, which need high growth to remain bullish.
This does not suggest that we cannot rally, just that it is very unlikely that we are simply going to continue straight up in the air. I believe that waiting for signs of exhaustion will continue to be the way going forward, as we are still very much in a downtrend. I believe that the 14,000 level is a major barrier, followed by the 14,300 level. Because of this, I am going to sit on the sidelines and let the bounce happen because to think that we are done selling off is probably a bit much at this point.
The 13,000 level underneath has been a hard barrier to break, so a bounce and signs of exhaustion could be a sign that the 13,000 level would be a target again. The 50 Day EMA is currently at the 14,400 level and sloping lower, so therefore I think there is plenty of dynamic resistance above. Whether or not this rally last couple of days is a completely different question, but right now I think just simply letting the market do its thing and then take advantage of a continuation of the overall trend.