Bears wobbled Monday into the final bell after being smacked around for a second consecutive session, states Jon Markman, editor of Strategic Advantage.
The Nasdaq 100 closed at 15,047, a rally of 0.5%. The gain for the benchmark was never really in doubt, despite a big opening decline. Bears appeared to gain the upper hand Sunday evening after futures traders walloped stock index contracts. Israeli and Hamas forces clashed during the weekend, sparking fears of a bigger conflict.
Bears immediately linked the shooting war with higher energy prices and the prospect that the Federal Reserve would be forced to keep interest rates higher for longer. Unfortunately for bears, buyers were waiting to scoop up bargains.
Cybersecurity, digital advertising, and enterprise software stocks turned green within the first 30 minutes. CrowdStrike (CRWD), The Trade Desk (TTD), and Veeva Systems (VEEV) might seem vaguely familiar. Pros have been desperately liquidating these shares and others during September as they sold their winners.
Selling great businesses where shares have performed well while holding onto the shares of bad companies. is a curious strategy, yet it is all too common. Unsurprisingly, pros are now finding they are on the wrong side of the tape. Expect them to chase winners into early 2024.
Bad habits die hard. Bears know this all too well. They too are on the wrong side of the trend. Big market moves are about narrative shifts. Both bulls and bears are beginning to agree the economy is headed for a period of significant decline, a natural outcome of the Fed raising its key bank lending rate by 550 basis points since March 2022.
A rally for the benchmark beyond the declining 50-day moving average at 15,048 will lead to significant new short covering. Bears will concede a rally to 15,619, the September first high. There is important support at 14,505, then 13,656, the gap from the May breakout.
Nasdaq Timing Model: Members bought the ProShares Ultra QQQ (QLD) at $61.49 on October sixth. It is an ETF that delivers 2x the daily performance of the Nasdaq 100 index. It closed Monday at $61.95. Place an order to sell the entire position at a target of $69.50. Place a stop loss order at $56.40.
