The Nasdaq 100 staged an incredible late rally in yesterday’s session to cancel out losses sustained earlier in the day and is building on that rally today as the Fear and Greed Index rises. The Nasdaq 100 is up 1.81% as the Fear & Greed Index inches towards neutral territory after a 2-point increase from last week. The Fear & Greed Index has shown a remarkable recovery after hitting lows of 3.0 at the height of the market selloff in March 2020. Central bank actions have been the key to the market recovery so far, and some positive earnings from key players on the Nasdaq, such as Tesla and Amazon have made a difference. Furthermore, the biotech stocks which have been led in performance by Gilead Sciences have held their own as possible coronavirus vaccine candidates and possible treatments have come on stream.
Fear typically pervades the market when there is a massive selloff. But as prices dropped to lows not seen in years, buying opportunities arose. Institutional investors have been accumulating many of the Nasdaq’s constituent stocks, and as we approach the point of neutrality, public participation will start to increase. A tilt above 60 will send the Fear and Greed Index away from the neutral zone and into the greed zones, where public participation is expected to start peaking. But watch it; that’s when the institutional players may begin distributing and taking profits.
As economies start to open, so will the full realities of the damage caused by the coronavirus pandemic begin to set in. If this coincides with the period of peak distribution by institutional investors, or a Fear & Greed Index reading that exceeds 80, discerning investors may need to get ready for a change in sentiment.
Today’s price action is once again testing the upper boundary of the range that was defined last week at 8945.7. This area continues to hold up as a very strong resistance; the Nasdaq 100 has hardly been able to make any progress above this level.
A price break has to be identified by a 3% penetration close above this level, which makes 9092.3 available as the next upside target. Further price targets to the upside lie at 9167.4, and 9264.4 (point D in the crab harmonic pattern).
On the flip side, yet another rejection of price at 8945.7 may produce another retest of 8691.0, which is the intervening pitstop between 8945.7 and the lower barrier of the range at 8442.5. Below this price, we have further support at 8160.2 (close to the top of the Kumo) and 8015.5.