Index Rallies on Slowing Inflation

The fact that we gapped at the open also helps as well, because that shows that there is a huge surge of buying.

The Wall Street narrative on Wednesday suggests that even though inflation numbers are higher, it’s possible that the Federal Reserve may have to pivot. I don’t subscribe to this theory, at least not yet, as interest rates still have a long way to go before they are “neutral.” The fact is that inflation is at least three times what the Federal Reserve likes, so they are more likely than not going to have to continue tightening more than Wall Street is comfortable with.

Approaching the 13,500 Level

Nonetheless, the buying pressure seems to be there, and it’s going to be worth noting that we are getting close to the 13,500 level. That’s an area that should be rather resistive, so if we were to break above there, then it’s likely that the market goes looking to the 14,000 level. The 14,000 level also is where the 200-day EMA is sitting and dropping lower. The 200-Day EMA will be an area where people are paying close attention, as it defines the longer-term trend.

If we break down below the 13,000 level, then it’s likely that the market will go looking to the 50 Day EMA underneath, which is sitting at the 12,250 level. Keep in mind that technology stocks are extraordinarily sensitive to interest rates, so if they start to turn around and rise, that could be very negative for the NASDAQ 100 Index. Either way, I think we have a market that still has more bullish influence than bearish, at least in the short term. However, we know that volatility is off the rails at times, and it’s likely that we need to see the NASDAQ 100 become really noisy. It’s overdone recently, so do not be surprised if we get some type of pullback sooner or later. I thought we got that earlier in the week, but it does not look like it has quite stuck yet.

The fact that we gapped at the open also helps as well, because that shows that there is a huge surge of buying. The futures market went nuts when the CPI number came out lower than anticipated, but it should be kept in the back your mind that the Federal Reserve is going to have to continue tightening rather aggressively, even with is less than feared number.

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