- Summary:
- Nasdaq 100 at resistance as it forms the right shoulder of an inversed head and shoulders pattern. The first presidential debate to determine its move.
The first U.S. presidential debate is scheduled later in less than 24 hours, and Nasdaq 100 faces tough resistance. Its recent bounce higher came just in time for the index to maintain the higher lows series required by a bullish trend.
However, one cannot ignore the possibility that the index forms a head and shoulders pattern. If that is the case, the Nasdaq 100 index just met dynamic resistance, and the pressure mounts for a rejection to come next.
The Whole World Watches the First Presidential Debate
The first out of three presidential debates is about to start, and financial markets are in a wait-and-see mode. We may argue that the moves lower in the Nasdaq 100 from the 12,000 to the dynamic support, followed by the bounce to recent levels, were the result of profit-taking and market preparing for the election date.
Each week left until the election day brings a debate. It means that everything else in terms of economic developments and even related to pandemic comes in second place.
Extreme Short Index Exposure
In such complacent times, the short index exposure reached extreme levels. According to the CFTC data, large speculators have almost $50 billion short exposure on the major U.S. stock market index futures. This makes the largest short exposure in over a decade, right before one of the most important U.S. elections in recent history.
Nasdaq 100 Technical Picture
With the bearish sentiment dominating and the Nasdaq 100 facing tough resistance, bears have two options. Aggressive traders would want to short at the market and go for the head and shoulders’ measured move. However, the invalidation level for this trade must be the highest point in the head and shoulders pattern.
Conservative traders may want to wait for the index to break the neckline and then enter on the short side. If that is the approach, then a stop-loss at the current levels assures a sound risk-reward ratio for the trade.
Nasdaq 100 Price Forecast
