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US stocks trade for new highs

The NASDAQ index fell 24% from its March peak

US stocks are trading higher and hitting new session highs for major indices as European traders head out for the day.

  • The Dow Industrial Average is up 527 points or 1.66% at 32,257
  • The S&P index is up 107 points or 2.72% at 4038
  • The NASDAQ index is up 482 points or 4.25% at 11853.29
  • Russell 2000 is up 64 points or 3.7% at 1803.71

The Nasdaq certainly leads the way up, but it also led the way down. Since the March 29 high, the index has lost 24.16% over 31 trading days (see chart above). This move started after the pair tested the 100-day MA (blue line in the chart above).

Technically, the price low yesterday broke below the 50% midpoint of the upside from the post-pandemic low. This level came in at 11449.29. The price broke above this level today and continued its short hedging run to the top.

The market saw a sharp drop in a number of stocks and it’s safe to say that a lot of money was flushed out of the market into cash. This can lead to short coverage when FOMO kicks in.

However, there is a lot of uncertainty regarding inflation in the economy/earnings and Fed tightening that needs to work its way into the market. Inflation may come down thanks to the hikes, but that doesn’t mean the price hikes in 2022 will stick around and sap consumers’ wallets. Yes, they go on vacations and other “pandemic vacation” events that delayed those events, but what happens when the honeymoon is over?

I will follow price action for clues and be aware of levels that are broken on the downside as well as targets on the upside. For the Nasdaq, getting back below the 50% midpoint would technically not be a good thing.

On the upside, 11944, 12202, 12367 and 12573 are all upside targets for the Nasdaq index.

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