Weekly Indices Review - 04 January

It is interesting to highlight how many markets have dropped down towards major Fibonacci retracement levels through 2022, and the US Tech 100 is another major chart down to do so.

This weekly chart shows us how the Fed stimulus in early 2020 powered sharp gains for the index through 2021, only for price action to give back 50% of these gains through 2022.

Leaving the market to now ask: Were these gains in 2021 too much, or just too much too soon?

If the gains were driven mostly by stimulus, which has now passed, there are fears amongst some that on a poor year ahead the market could yet trade back towards the pandemic lows of 2020.

While the more bullish will hope that while stimulus may have pushed the market up too soon that, after a period of consolidation, the highs could be retested in the year ahead.

Leaving the overall market caught in the tug of war between these two opposing views and consolidating around the 50% area. Around 11,700 on the US Tech 100. Where it is normal for price action to trade within the 38.2-61.8% channel around the 50% level.

So there is an early test in 2023, can the psychologically important 61.8% retracement level hold? Will buying interest emerge as the market starts to wind back into gear after the holidays? Traditionally the 61.8% area of a major move does create strong support areas, so some traders may well be tempted to find a few bargains here. On the caveat that they could employ relatively tight stop levels, under the 10,500 area as confirmed breaks lower would ramp up concerns that the entire 2020-2021 move higher was failing.