Ultimately, caution is the better part of valor in a situation like this.
The NASDAQ 100 got clobbered to end the week on Friday as we continue to see a lot of noisy behavior. The “risk off” attitude of markets makes a lot of sense considering that the Federal Reserve is getting ready to tighten, and we have the concerns about Russia invading Ukraine taking some risk appetite out of the market. The size of the candlestick is something worth paying attention to, and we have seen a lot of heavy selling going into the close.
A lot of this is going to come down to any news about geopolitical risks now, which only makes our job even harder. If you are a bit concerned about how to trade this market, you are probably looking at a situation where you are better off being on the sidelines. This makes sense, as the most important thing you can do in a situation where you are confused it is to simply stand to the side. There will always be trading opportunities, and it is not your job to make every single tick that you can.
However, I will say that I would not trust any type of rally at this point, and signs of exhaustion will more than likely be selling opportunities after rallies. The 200 day EMA is currently at the 14,896 level, so it does make sense that that could be the “ceiling in the market”, unless we get some type of really good news on the Federal Reserve and Vladimir Putin backs off at the same time. That could be reason enough to think that perhaps we would get a massive bullish move, but even that would probably be short-lived due to the fact that the economy is almost certainly going to go into some type of recession anyways. In other words, it is not the best environment for highflying growth stocks, so the NASDAQ 100 will be a laggard to say the least. The 14% loss that we have seen so far looks as if it is going to continue to go much lower. Ultimately, caution is the better part of valor in a situation like this.
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