Nasdaq 100 - Headed to 2022 lows after the bear market rally top

As the Jackson Hole economic symposium unravels in Wyoming, market participants are looking for clues about the future steps of the Federal Reserve, with many traders expecting a hawkish speech from Jerome Powell. However, one question lingers: “Will we see another irrational melt-up in the market despite the mounting evidence that the U.S. economy is headed into a deeper recession toward the end of 2022?.”

Unfortunately, we do not know the answer to this question. But we know that the FED's hawkish stance on pursuing more rate hikes and economic tightening will inadvertently exert more pressure on the U.S. stock market. Indeed, we think these fundamental reasons will lead to risk aversion, manifesting in the selloff leading to 2022 lows.

In addition to that, over the past two weeks, the Nasdaq 100 index showed an inability to move higher, leading us to speculate about the bear market rally's top. Although, we still seek more confirmations of our bearish assumptions. Despite that, we remain bearish on the Nasdaq 100 index and maintain a price target of 11 000 USD. For QQQ, we maintain a price target of 300 USD.


Illustration 1.01

Illustration 1.01 shows VIX and U.S. stock market indices. Yellow arrows point to particular developments in the market. Ideally, we would like to see another spike in VIX to confirm our bearish thesis regarding the continuation of the weakness in the U.S. stock market.

Technical analysis - daily time frame
RSI, MACD, and Stochastic are bearish. DM+ and DM- are neutral. Overall, the daily time frame is bearish.

Illustration 1.02

The picture above shows the daily chart of the Nasdaq 100 continuous futures and simple support/resistance levels. It is observable that yesterday, the index halted its rise slightly below the 0.382 Fibonacci retracement level, which is bearish. However, a breakout above it will be bullish.

Technical analysis - weekly time frame
RSI, Stochastic, and MACD are turning bearish. DM+ and DM- failed to perform bullish crossover. Overall, the weekly time frame is bearish.

Illustration 1.03

The weekly chart of the Nasdaq shows the bullish breakout above the upper bound of the channel. However, this breakout was quickly invalidated, which is bearish.

Please feel free to express your ideas and thoughts in the comment section.

DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.

Trade active:

We will pay attention to the price and its ability to stay above/below the upper bound of the channel. Position above it is bullish, while the position below it is bearish.

Trade active:

The bullish breakout above the 0.382 Fibonacci level occurred. We will pay attention to the price action during the Powell's speech and after it.

Trade active:

After the breakout's immediate invalidation, the market has drifted down 2.5% so far. We are very bearish as developments we outlined previously are taking place. We are seeing more confirmations of our bearish thesis.

Trade closed: target reached