Nasdaq 100: Tech Stocks Need Base Formation to Sustain Rally, Not V-Recovery

Key Insights

• The Nasdaq-100 has rallied but requires a support base at the 200-day moving average (24379) before attempting to reach new highs above 26670.
• Investor sentiment has shifted from aggressive buying to a more cautious "show me the money" approach, focusing on profitability.
• The index recently fell below its 50-day moving average and approached the 200-day moving average after peaking at 26349 on the day of the Fed's announcement.

Market Analysis

The March E-mini Nasdaq-100 futures are gaining momentum as the trading session progresses. Despite the upcoming Fed minutes, the market appears to be pricing in no rate cuts for March and a 50% chance for June.

There is concern regarding the timing of the recent peak at 26349, coinciding with the Fed's announcement, leading to speculation about whether the subsequent sell-off was related to the Fed's actions or simply a market correction.

Investor Behavior

Recent market behavior indicates that investors are no longer leading with their money but are instead seeking tangible profits. This shift in mentality has contributed to a leveling off in the technology sector, particularly as concerns about AI's impact on business emerge.

The Nasdaq's recent performance suggests that investors are prioritizing value, especially after a period of overpriced stocks. The 200-day moving average has historically represented a value threshold in the bull market.

Future Outlook

For the remainder of the week, it is crucial for the Nasdaq to maintain support at the 200-day moving average (24379.78). While overcoming the 50-day moving average (25563.75) would be beneficial, the focus should be on establishing a solid base rather than rushing to new highs.

Creating a stable support level will enhance the index's chances of reaching new record highs, as opposed to attempting to recover from lower lows, which invites short-selling pressure.