The current trading landscape suggests a strategic approach for the NASDAQ 100, with a recommendation to short the index around the 19,900 mark. Recent positive U.S. jobs data initially boosted the NASDAQ, but the lack of sustained momentum raises concerns about market sentiment. This could indicate a potential shift in market dynamics, making it an opportune moment to capitalize on a downward trend.
The proposed trading strategy includes a downside target of approximately 17,100, with a stop and reverse order positioned above last week's high at around 20,320. This approach reflects a calculated risk, as traders aim to navigate market fluctuations while positioning themselves for potential gains. The rationale behind this strategy is based on the observation of an ABC Elliott wave correction, which could signal a significant retracement in the index's value.
Adjustments to stop loss levels are being considered to mitigate risk in ongoing trades. For those currently short from the 1,020 area, it is recommended to lower the stop loss from 1,150 to just above the late July high at 1,089, specifically to 1,090. This tactical move aims to protect profits while allowing for potential further declines in the index. The market has shown signs of testing the August-to-October uptrend line, indicating the need for traders to remain vigilant and responsive to evolving market conditions.
Last week's trading outcomes highlight a successful long position in the volatility index, the VIX, initiated around 18.76. With the VIX showing positive movement, traders are encouraged to raise their stop loss to the entry level, effectively securing a risk-free position. Alternatively, a more conservative approach would involve adjusting the stop to just below the late September low at 17.55, ensuring that profits are protected while still allowing for potential upside if volatility continues to rise.
The current market sentiment presents a complex picture, with traders grappling with the implications of recent economic data. While the positive jobs report initially sparked optimism, the subsequent lack of sustained rally in the NASDAQ raises questions about the durability of this sentiment. Analysts caution that the market may not be as bullish as it appears, suggesting that a more cautious approach could be warranted.
The potential for an ABC Elliott wave correction adds another layer of complexity to the trading environment. If this pattern unfolds as anticipated, it could lead to a significant decline in the NASDAQ, reinforcing the rationale for shorting the index. Traders are advised to remain alert to market signals and adjust their strategies accordingly, as the landscape continues to evolve.
In summary, the current trading strategy for the NASDAQ 100 emphasizes a short position around 19,900, with a clear downside target and carefully adjusted stop losses. Traders aim to capitalize on potential market corrections while managing risk effectively. The interplay of economic data, market sentiment, and technical analysis will be crucial in determining the success of this approach in the coming days and weeks.