#INDICES #Nasdaq100 & #SP500 Monthly Forecast: January 2024

Nasdaq 100 Forecast: January 2024

• If you are the type of person who likes playing with fire, the NASDAQ 100 is for you.
• It’s not that I think this market is suddenly going to implode and that we are going to see some type of massive downtrend in the short term, it’s just that much like its counterpart the S&P 500, we are simply overdone at this point.
• Remember, the NASDAQ 100 should be called the “NASDAQ 7”, because it’s about 7 stocks that make up almost the entirety of momentum.

Look For Value

As far as stock markets are concerned, sometime this year we are going to get a nasty pullback. This does make a certain amount of sense because while Wall Street is celebrating lower interest rates coming this year, the reality is that quite often the Federal Reserve starts cutting rates because it sees something somewhat ugly in the economy. If that’s going to be the case, then this could be a very intriguing index, to say the least. After all, it’s the “go-to” for money managers so that they can get exposure to the usual 7 suspects, but traders will probably start selling to collect profit. You can counterbalance that argument by saying that if rates are going lower, it propels money into technology.

The question of course is whether or not the Federal Reserve is going to start loosening monetary policy because inflation is in check, or if it’s because the economy is desperately going to need it. When you look at this chart, it’s very bullish and I certainly would not advocate shorting this market. However, I don’t advocate chasing this move. The NASDAQ 100 is up roughly 20% since late October, which of course is not normal behavior. That being said, the market has proven to be so heavily manipulated by just a handful of stocks that you cannot consider selling it. What we want to see is some type of significant beat down, perhaps in the order of about 10% to start buying again. The 15,780 level is an area that I think should show a lot of support, so I would love to see the market drop to that area, but unfortunately, I think this is going to be a situation where you probably won’t even get that much of a pullback. Either way, chasing isn’t advised either. Sooner or later, markets do retrace and that’s when you need to be involved.

S&P 500 Forecast: January 2024

• As I look at the S&P 500 at the end of December, it’s obvious that January is set for a major showdown.
• While the market is undoubtedly a bullish one, the reality is that the insanity that is crept into the buying pressure is something that needs to be paid close attention to.
• After all, the only real question as I write this on December 27 is whether we break to a new all-time high.
• It isn’t whether you should be a buyer or seller, nor is it anything to do with economic reality, it’s whether or not we can keep up this type of momentum.

Eventually, Gravity Shows Up

It’s difficult for me to imagine that sometime in January we just simply take off to the outside and continue the type of euphoria that we have seen. After all, since the Halloween low, the S&P 500 has essentially gained about 16 ½%. That’s a lot for just 2 short months. Most money managers would be thrilled with that type of return for the year to put that into perspective.

Because of this, I think sometime during January we get a bit of a selloff. I don’t know if it comes before or after we break above the crucial 4800 level, but clearly, we have overdone the rally. You can see this market drop 200 points in still be in an uptrend. As a retail trader, unless you are already involved in this market you should probably wait for some type of value to present itself. What I want to see is a 10% correction, something that is quite common in the market. Unlike a money manager, you don’t have to put money to work right away at the beginning of the year, and you can simply avoid the S&P 500 in the meantime.

Do keep in mind that if you choose to simply start buying here, you are essentially playing a game of “chicken” with gravity. Eventually, it shows up in the market and pulls back. Unfortunately, I suspect that a huge number of retail traders are chasing the market up at these extraordinarily high levels. That is typically what Wall Street will do, run stock markets up like this, sell stock to the retail trader to collect profit, and then bite again once the market capitulates.

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