Nasdaq 100, TQQQ ETF outlook as the fear and greed index rises

August 14, 2023 10:38 PM PDT | By Invezz

Fear and greed index rises

Technology stocks have outperformed value stocks this year, mostly because of the growth of AI. This trend has pushed some of the biggest AI companies like Nvidia, Microsoft, and Apple sharply higher.

At the same time, there is the lingering hope that the Federal Reserve will start pivoting soon. This view is supported by the recent American inflation data that revealed that the core consumer inflation figure dropped from 4.8% in June to 4.7% in July.

A closer look at the inflation figures showed that excluding housing, the trend was better than expected. Therefore, most analysts believe that the Fed has reached the terminal rate as it tries to engineer a soft landing.

All these factors have led to greed in the market. The fear and greed index has moved to the greed zone of 65. The market momentum, stock price strength and stock price breadth have moved to the greed zone while junk bond demand has moved to extreme greed.

Safe haven demand is in the fear area while market volatility and put and call options are in neutral. Tech stocks thrive when there is greed in the market.

Still, there are concerns about the Nasdaq 100 index. The first one is on the market potential for AI. While companies like Nvidia and Microsoft have invested heavily on generative AI, it is still unclear how they will make money. Some analysts are even calling it the AI bubble.

The other concern is the valuation of key Nasdaq 100 composites. For example, Apple is now valued at over $3 trillion despite its slow growth. It is also hard to justify Nvidia’s $1 trillion valuation.

Watch here: https://www.youtube.com/embed/daUfGn74ogU?feature=oembed

Nasdaq 100 index forecast

The daily chart shows that the Nasdaq 100 index has been in a strong bullish trend in the past few months. It has remained above the 50-day and 100-day moving averages. Most recently, it has formed a slanted bullish flag pattern, which is a positive sign.

The index is sitting at an important level since this price was the highest point in March. Therefore, I suspect that Nasdaq 100 index will continue rising in the coming weeks with the initial level to watch being at the YTD high of $16,000.

In this case, in addition to buying the ordinary Nasdaq ETFs like Invesco QQQ and QQQM, it makes sense to allocate a small portion of your portfolio in TQQQ. TQQQ is a highly leveraged fund that tends to outperform QQQ when things are going on well.

The post Nasdaq 100, TQQQ ETF outlook as the fear and greed index rises appeared first on Invezz

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