NASDAQ Sets Up For An Ugly Correction
Andrew Lane | Jan 10, 2022 08:57AM ET
Following the double top in late November and mid-December around the 16,600 level as evidenced in the daily chart below, The NASDAQ appears to be setting up for a significant correction.
From today's intraday viewpoint of around 15,450 (nearly a 7% correction), the price has broken through the bottom rail on the chart, and a convincing close below this level would bring the next major bottom into play of around 14,500.
This would be a 12.6% correction. The daily chart below also shows the two-month-long congestion area being broken.
The weekly chart shows just how parabolic the last phase of this move has been when we consider the weekly chart. The all-time highs have kept coming in the tech-heavy index, and a correction one could argue is both overdue and healthy.
However, this has coincided with the tapering, and history has proven that each time the Fed has tapered, the market has wobbled.
The big question is how far the stock indexes will roll over and how soon the Fed will do a turnaround on their QE withdrawal. If implemented, the looming interest rate rise has the potential to hurt the system, which only further goes to reinforce the Fed falling on their sword.
The markets have been built and propped up in recent times, and we are overdue a sizeable correction given some valuations are utterly bizarre.
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