Bulls came under immediate pressure on Monday, and the late afternoon was all about the retreat. The Nasdaq 100 closed at 11,912, a loss of 2.1%, states Jon Markman, editor of Strategic Advantage.
It is amazing how quickly sentiment changes. The bullish themes that dominated last week, on Monday were abruptly reversed.
Tesla (TSLA) shares tumbled 6.3% after Ford (F) announced price cuts for its hot-selling Mustang Mach-E electric vehicle. The price cuts are being viewed through the lens of the coming economic slowdown. Lower prices remind investors that corporate profits will come under pressure and that stock prices are too high, or so the bearish theory goes.
None of this seemed important a week ago when corporate executives were wondering aloud about slack demand. Stock prices were rising. The bottom line is the benchmark NDX rallied last week to its overhead resistance level at 12,040, and bears pushed back.
So far, the weakness is nothing more than that. The real test will come later this week as the benchmark nears critical support at 11,595, the 20-day moving average. Resistance for the benchmark is 12,250, Friday's intraday high.
The QQQ Loop: Current position is the WisdomTree Floating Rate Treasury ETF (USFR), a cash alternative.
If the NDX opens sharply higher on Tuesday, it might be appropriate to try a short-term trade for the ProShares UltraShort QQQ (QID), an ETF that delivers two times the inverse daily performance of the NDX index. I will send an intraday update if applicable.