Monthly #NASDAQ100 & #SP500 Forecast: December 2023

 

NASDAQ 100 Forecast: December 2023

• The NASDAQ 100 has been explosive to the upside during the trading month of November, as interest rates have fallen quite drastically in the bond market.
• With that being the case, the market is starting to pay close attention to the 16,000 level, as it is a bit of a barrier.
• We will more likely than not see a bit of a pullback from this point, perhaps opening up the possibility of the 15,250 level offering support.

Near the 15,250 level we have a significant amount of support based on previous action, and of course the 50-Week EMA, followed very closely by the 200-Week EMA indicator. We’ve been in an uptrend for some time, but a bit of a pullback does make a certain amount of sense considering that we had exploded so rapidly to this level. Ultimately, a short-term pullback will end up being a nice buying opportunity, but we also have to keep in mind that the month of December features holidays that will sap liquidity out of the market as well.

Lack of Volume Warrants Cautiousness

The alternate scenario of course is that we just simply take off from here and explode above the 16,100 level, which could be a bullish move just waiting to happen, but at this point I think it does make quite a bit of sense that we need to be cautious with our trading positions, and if you are already involved in a bullish position for the NASDAQ 100, it might be time to push your stop loss is higher, as I do think that this pullback is somewhat imminent. Furthermore, I think it’s very healthy for the market. Keep in mind that the NASDAQ 100 is only driven by a handful of stocks for the most part, so you will have to pay attention to all the usual suspects.

Lack of volume continues to be a major concern in the 3rd and 4th week of the month, so you need to be very cautious later in the month. That being said, markets tend to go higher over the longer term anyway, due to the fact that the NASDAQ 100 is not an equal weighted index, and therefore the usual suspects will continue to cause passive investors to jump into this index and rally. I don’t have any interest in shorting this market anytime soon, but I do recognize that buying it all the way up at these levels might be a bit of a stretch.

S&P 500 Forecast: December 2023

The S&P 500 has been explosive during the month of November, taking off and breaking out of a massive bullish flag pattern. Quite frankly, the market is likely to continue to see a lot of volatility, and as I write this article, we are very close to a major resistance barrier in the form of 4600 and are starting to pull back just a bit.

This would make a certain amount of sense, as we have rallied so quickly in such a short amount of time. Because of this, I think you get a situation where a pullback offers value, and of course we have to ask questions as to whether or not the “Santa Claus rally” has already happened, or if there is more out there? A lot of this will come down to the 10 year yield in the United States, which has been dropping, thereby propelling stock markets higher.

Caution Amidst Year-End Trading Dynamics

Underneath, we have the 50-Week EMA offering a significant amount of support near the 4400 level, backed up by the 200-Week EMA. With this being the case, the market is likely to continue to see a lot of support in that general vicinity. If we were to break down below there, it would be an extraordinarily negative turn of events. Conversely, if we were to turn around and take out the 4600 level on a daily close, that probably brings in a significant amount of “FOMO trading”, opening up the possibility of a move to the 4800 level. We have seen a significant amount of noisy behavior, and therefore I think we continue to do so. Beyond that, you need to keep in mind that the end of the year typically is somewhat thin trading, especially as most traders will be focusing on the holidays more than anything else. This happens time and time again, and therefore you need to keep an eye on volume at the same time.

We are presently in the midst of forming a bit of a “double top” on the weekly chart, and therefore a lot of technical traders will be looking for a pullback. I think that makes a certain amount of sense, but keep an eye on the 4400 level to determine whether or not it is a simple pullback, or if it’s something a little more often is.

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