NASDAQ 100 Forecast: Market Shrinks Late in the Day

The NASDAQ 100 initially tried to rally during the trading session on Tuesday, but as US Senate Majority Leader McConnell suggested that it was not going to be an easy path through the Senate for an extension of stimulus payments from $600 to $2000, people started running for cover later in the day. However, the 13,000 level above is a large, round, psychologically significant figure, but given enough time I do think we will continue to go to the upside.

Something that should be paid attention to is that so far, the bullish uptrend line that has been a major influence on this market has held, so it is likely that we could continue to see buyers on dips. Even if we break down below the uptrend line, there should be a significant amount of support near the 50-day EMA, which is close to the 12,200 level. If we break above the top of the shooting star for the candlestick on Tuesday, then it is likely that we could go through the 13,000 level rather quickly.

I have no interest in shorting this market, because the NASDAQ 100 is one of the more bullish indices out there, and as long as we have the “work from home economy”, it makes sense that we will continue to see a lot of these major companies in the index do quite well. Remember, this is not an equally weighted index, so a handful of these companies can move the index by themselves. I do think stimulus will come out much bigger than anticipated, and possibly even more often than anticipated going into the new year, as the Biden administration is likely to flood the markets with stimulus as well.

From a longer-term perspective, the 200-day EMA is sitting just below the 11,000 handle, so I think that is your “long-term floor” in the market. If we were to somehow break down below there, then it would lead to a huge meltdown. We are so far from that right now, though, that I think any time we pull back buyers will continue to jump into this market and take advantage of it. Be aware the fact that liquidity is very thin right now, so news will continue to throw the market around erratically.