On Thursday, the United States released Flash GDP numbers for Q4 of 2022, falling in line with most base expectations. However, when you dug into the numbers a little bit deeper, most of the gains in GDP were due to aircraft and automobile orders, while the rest of the overall economy looked very weak.
Combine that with the earnings season going on currently, and you have a recipe for extreme volatility in the NASDAQ 100. Recently, Microsoft has warned during an earnings call that its forward guidance was miserable, and therefore we have seen technology stocks get hit. In this environment, it is essentially traders playing a game of “chicken” with the Federal Reserve, as they believe the Federal Reserve will start to ease its tightening policy, while the Federal Reserve continues to tell traders that they are nowhere near doing so. It is in this environment that we see a lot of choppy and sideways volatility overall.
When you look at the chart for the NASDAQ 100, it becomes increasingly clear that the 12,000 level will be very important. During the day on Wednesday, the market had initially sold off quite drastically, but found enough support near the 200-Day EMA to turn things around and form a hammer. We have since broken above there, but the price action early in the day does suggest that it’s going to be a very hard fight to truly take off to the upside.
It should be noted that the Stochastic Oscillator is in the overbought condition again, and is starting to see a crossover. This could be a sign of exhaustion setting into the market, which would not be a huge surprise. Quite frankly, with the earnings season going on, after market announcements could have an outsized effect on how this index moves. The 200-Day EMA should offer support again, which is currently right around the 11,500 level. However, if the market were to give that up, it could send the NASDAQ 100 much lower. Above the 12,100 level on a daily close, would signify a bit more momentum is entered the market, and it’s ready to breakout for a bigger move.
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