Pulls Back From the 200-Day EMA

Ultimately, this is a situation where volatility continues to be a major issue, as traders trying to get a handle on what we are going to see the Federal Reserve said. 

• The NASDAQ 100 pulled back during the trading session on Monday, as the 200-Day EMA has caused a little bit of resistance.
• At this point, we have to ask whether or not the trendline being broken to the upside matters, or if we need to look at this through the prism of a sideways rectangle.
• That question will probably be answered once we get through the Federal Reserve meeting on Wednesday, and I anticipate that between now and then, we will probably see a whole lot of Brownian motion.

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Stock markets are crashing again

If we were to break above the highs on Friday, then it’s possible that we could see this market go looking to the 12,750 level, but we need some type of bullish catalyst to get there, beyond the zero-day options expiration noise that we have seen for the last several weeks. All things being equal, I think this is a market that is probably going to be paying quite a bit of attention to the fact that we are between the 50-Day EMA underneath, and the 200-Day EMA above. That typically means we are getting ready to squeeze in one direction or another.

Noise Ahead

Ultimately, I think the one thing that you probably have is going to be a lot of noisy behavior. Ultimately, this is a situation where volatility continues to be a major issue, as traders trying to get a handle on what we are going to see the Federal Reserve said. After all, it’s all about liquidity these days, as the generation of traders on Wall Street now is mainly comprised of people that have never had to deal with inflationary issues. In other words, they have no idea how to trade in this environment. Because of this, if they don’t get coddled by the Federal Reserve, it’ll be interesting to see whether the buyers will step back in.

It’s interesting because there’s always a huge narrative out there on Wall Street to get people to buy, but whether that actually ends up being the case remains to be seen. I suspect that the market does very little between now and then, essentially chopping back and forth as nobody wants to put a lot of money to work in what essentially is going to be a gamble.

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