The Nasdaq 100 index futures wavered on Monday as investors reflected on the implosion of Credit Suisse, the second-biggest Swiss banking group. The closely-watched index was trading at $12,540, which was a few points below this week’s high of $12,867.
Mike Wilson gives hope
The Nasdaq 100 and other American indices have been under intense pressure as investors focus on the meltdown of the banking sector. This challenge increased during the weekend following the collapse of Credit Suisse, the giant banking company. As we wrote here, the company was acquired in a $3.3 billion deal by UBS, its big rival.
Amidst all the gloom, Morgan Stanley’s Mike Wilson has some good news for investors. In a note, he warned that the recent volatility in the banking sector presented an end of the ongoing bear market. He argued that most bear markets end when there is an unseen catalyst that is obvious in hindsight forces market participants to acknowledge what has been right in front of them the entire time.
Therefore, he expects that this turmoil will lead investors to focus on the worsening earnings growth outlook and restrictive credit conditions. He wrote:
“The events of the past week mean that credit availability is decreasing for a wide swath of the economy, which may be the catalyst that finally convinces market participants that earnings estimates are too high.”
The relatively optimistic tone is encouraging because Mike Wilson is known as one of the top bears in the market. He accurately predicted the market crash in 2022 and has recently warned that the S&P 500 index could plunge to about $3,000 in the next few months.
Mike is right about how bear markets end. For example, the stock market started a remarkable comeback shortly after Lehman Brothers filed for bankruptcy in 2009. Similarly, the post-Covid market rally happened as the number of cases jumped.
Still, Mike Wilson warned that there will be volatility in the coming weeks. As such, he recommended investing in defensive, low-beta sectors and stocks.
Nasdaq 100 index forecast
NASDAQ chart by TradingView
The Nasdaq 100 index has drifted upwards in the past few weeks, outperforming its counterparts like the S&P 500 and Dow Jones. On the daily chart, the index has remained above the 50-day exponential moving average (EMA). It is also above the double-bottom level of $10,656 and is slightly below the neckline at $12,847.Therefore, the index will likely continue rising if bulls manage to push it above the key resistance level at $12,847. If this happens, the index will likely continue rising as buyers target the next reference level at $13,686.
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