With inflation and tightening monetary conditions, it is very likely that these high growth stocks are about to get hammered.
The NASDAQ 100 got hammered on Tuesday but has recovered quite nicely. This suggests that perhaps the market may recover a bit in the short term, as we have seen a rather significant pushback. As the likelihood of an armed conflict seems to be drifting away a bit, that is at least going to take off the “war trade” and negativity that comes with it. Ultimately, this is a market that I think probably is due to have a bounce anyway.
Keep in mind that markets do not go in one direction forever, so it does make sense that we will get a little bit of a bump. That being said, the bump is going to continue to be short-lived, and I am looking for exhaustion in order to get involved.
Looking at this chart, I think the 14,500 level would be an area where we would see a certain amount of exhaustion that we can take advantage of. The 50 day EMA looks likely to slide below the 200 day EMA, kicking off the so-called “death cross”, which is a very negative event. That being said, the VIX sold off late in the day as volatility sellers came to the rescue of the markets, and leaving solid in the VXN, the equivalent for the NASDAQ. That being said, the market is more than likely going to continue to see a lot of negativity given enough time, because the economic situation does not suggest that the NASDAQ should be strengthening. With inflation and tightening monetary conditions, it is very likely that these high growth stocks are about to get hammered. Apple almost fell through the floor during the day, and it certainly looks as if it still faces quite a bit of pressure. The NASDAQ 100 is only driven by about seven stocks, with Apple being one of the biggest. In other words, it is probably only a matter of time before we see sellers taking over and pushing this market much lower. I have no interest in buying this market in the short term but will have to keep a certain amount of flexibility in my approach. If we drop below the lows of the session on Tuesday, look out below.
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