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Nasdaq – rally on steroids ?

The recent market moves leaves investors and traders scratching their heads and there are plenty reasons for that. S&P500 is in its best  start of the year from 1987, even though none of the global trade issues resolved yet and US/Europe/Japan/China economies continue to accumulate problems.

For sure, the mechanics of  this rally is evident – the daily hypnotic effect of US-China talk headlines, more importantly – unexpected  dovish U-turn by Fed, record corporate stock buybacks. Yet, there is a feeling that something is really wrong here and many blame that markets are “rigged” especially after yesterday’s Trump tweet  that sent oil down in a few minutes.

Nasdaq weekly chart

This week agenda is extensive. Powell will have two-day testimony to Congress  starting from today. It is widely  expected that Powell will reiterate his dovish stance towards further interest rates. Theoretically it should continue boost markets. But,  on Thursday we expect the Chinese PMI releases for February, so apart from trade talks headlines, now it is time to look at fundamentals.

Nasdaq Daily chart

I was confidently bearish last couple of weeks and  a proponent of shorting Nasdaq starting from around 7000 and so far price relentlessly continued rally. On a daily chart it is very evident that all the resistance clusters, in particular 7000-7060 cluster were broken. Next resistance is  7165 (yesterday’s maximum) and 7200-7220 area. If price manages to break those also, then we are again officially in bullish market. Till then, I consider it as a bear marker rally.

I believe the price is too much overbought and going long would be riskier at these levels. The correction is more likely now and therefore, I will short from 7160 and 7220 respectively, scaling into position at these two levels. 

Have a nice day !