Bears started Wednesday on offense following a report that the Biden administration is considering new restrictions on artificial intelligence chip sales to China, states Jon Markman, editor of Strategic Advantage.
The assault was short-lived. The Nasdaq 100 finished at 14,965, a gain of 0.1%. Bears are in a predicament. The Federal Reserve is hawkish, Wall Street investment strategists are bearish, and on Monday the Wall Street Journal story injected political risk. When the Commerce Department ordered in September that Nvidia (NVDA) stop exporting AI chips to China, shares plummeted by 6.6% to $139.25.
Bears managed only a 1.8% haircut on Wednesday, leaving Nvidia shares at $411.17. Bulls are looking past the prospect of higher interest rates, a slowing economy, and weaker corporate profits. They are even downplaying the political risk of a trade war with China.
Bulls are climbing the proverbial wall of worry, and that is big trouble for bears. Their narrative doesn’t work when investors refuse to listen. Friday is the last day of the second quarter for professional money managers. Money follows strategies that have been working. This means next week should feature more money chasing the biggest technology stocks.
There is overhead resistance for the NDX at 15,255, then 16,004, the January 2022 high. Bears need a close below 14,687, the rising 20-day moving average. That is the only near-term outcome that will force bulls to rethink their feverish dip-buying.
The NDX Loop: Members bought ProShares Ultra QQQ (QLD)—a 2x leveraged ETF that tracks the Nasdaq 100—at $63.00 on Wednesday, June 28. Now set up to sell half the position at $70.59 lmt gtc, and half at $75.70 lmt gtc. Set stop at 59.34 stp.