The stock market continues to outperform, and Nasdaq 100 is leading it higher. The recent developments on the U.S. fiscal front led to higher stock market prices and a bullish pattern for the Nasdaq 100 that points to a new all-time high.
A similar pattern appeared on the price of gold in 2019, albeit on a bigger timeframe. It is an inversed head and shoulders pattern, but one that forms right after the price makes a new high. For a reversal pattern, it needs a bearish trend, but this is not the case here. Instead, the market made a simple correction, and now the head and shoulders acts as a continuation pattern.
The fiscal stimulus certainly plays a key role in supporting higher stock market prices. The discussion related to the second round of fiscal stimulus revolves around trillions of dollars – an amount that will likely trigger inflation in the medium to long-run, a weak dollar, and higher stock market prices.
As such, investors pour money into the stock market on the expectations that the advance will compensate the USD decline.
The technical pattern mentioned earlier clearly shows how the price built energy before the recent break higher. The neckline at $11,600 held for a while, and the breakout opens the gates for a move towards a new all-time high.
During a head and shoulders formation, the price action in the “head” of the pattern tells much about what follows next. Therefore, if the market forms another reversal pattern during the head’s formation, it reinforces the bullish bias.
In this case, the market formed a double bottom at the $10,800 area before heading for the neckline. It reinforces the bullish case, and if we project the measured move from the neckline, the Nasdaq 100 should make a new all-time high. To trade it, bulls may want to go long at market and have a stop at the lowest point in the right shoulder, while targeting a new all-time high.
