The Nasdaq 100 has pulled back in the past few days even as the VIX index plunged to the lowest level since August. The VIX has nosedived by over 40% from its highest point in October, which is a sign of low volatility. Treasury bond yields and the US dollar index have been in a strong downward trend. Nasdaq 100 was trading at $11,758, which is slightly below this month’s high of $12,015.
VIX index retreats
Technology stocks have staged a strong recovery in the past few weeks as investors price in a more dovish Federal Reserve. Minutes published last week showed that most Fed officials were supportive of slowing the pace of rate hikes in the coming meetings. This view is supported by the fact that inflation has continued slipping. According to AAA, the average gas price has dropped to $3.55, down from the year-to-date high of $5.
Meanwhile, the VIX index, which is a good measure of market volatility, has dropped by more than 40%. Historically, tech stocks tend to do well in a period of low volatility and when the Fed is shifting a dovish tone. The fear and greed index, which looks at several market indices has moved to the greed level of 65. It has risen to this level as the stock price strength and breadth have moved to extreme greed while safe-haven demand and put-and-call options rose to greed.
Still, some analysts question whether the Nasdaq 100 and other American indices are in the clear for more gains. For example, analysts at Goldman Sachs warned that the broad bear market will continue into 2023. They noted that the conditions necessary for a bull run were not yet set in. A potential catalyst for the Nasdaq 100 index is that most tech companies have seen their valuations slip.
Nasdaq 100 index
The four-hour chart shows that the Nasdaq 100 index has been in a slow bullish trend in the past few weeks. It has moved slightly above the 23.6% Fibonacci Retracement level and the 25-day moving average. The index has also formed a slanting double-bottom pattern that is shown in black. It has also moved above the Ichimoku cloud.
Therefore, in the near term, I suspect that the index will continue rising as buyers target the 50% Fibonacci Retracement point at $13,000. A drop below the support point at $11,530 will invalidate the bullish view.
