Technology bulls on Monday continued to consolidate recent gains as familiar narratives seeped into the mix, states Jon Markman, editor of Strategic Advantage.
The Nasdaq 100 closed at 15,840, a loss of 1.0%. The weakness for the benchmark got its start Monday following another bearish market call from Mike Wilson, head market strategist at Morgan Stanley.
Wilson believes that stock prices fully reflect the likelihood the Federal Reserve will soon slow its fight with inflation. He also thinks that investors are too optimistic about corporate profits in 2024. All of this might seem vaguely familiar.
Wilson has been mostly bearish for one reason or another since 2019 when the NDX was at 8,500. His tenacity is a masterclass in punditry. Conviction plays better than reliable insight in the media. His bearish market calls get a lot of attention, yet very little true scrutiny.
Offering that stocks might pull back after a torrid rally since late October isn’t a great market call. There has been every reason to expect bulls to retreat. They need to secure captured territory ahead of the next leg high. This is normal fortification. Bulls are making sure that all of the near-term support levels are buttoned up on the off chance that bears finally get their act together.
During the morning decline, the NDX slipped to 15,700, exactly the 20-day moving average. The bulls were ready. They bought that selloff. Although the index did close lower, the ending point was at the session high. There is more important support at 15,155, the 50-day moving average.
This level would be the best near-term entry level for new positions; however, bears need to first win back the 15,700 level. Mike Wilson aside, that might even be a tough ask.
This is the bulls' market to win in December. The odds are good that they will mount a strong rally to new highs over the next several weeks.
