Nasdaq Composite will now probably see a correction of 7-12%.
Updated
Clear technical signals have now been given that a major correction may come within a short time for one of the world's most important stock market indices, The Nasdaq Composite Index (^IXIC) in the USA
We all know that there will occasionally be some slightly larger corrections of typically between 7-12 per cent, and even if the underlying trend for indices or shares can be positive.
Now the time may have come for this type of correction, and for the very important American stock market index Nasdaq Composite.
Technical Analysis of the Nasdaq Composite Index (^IXIC)
If we look at the weekly charts for the Nasdaq Composite (^IXIC), a clear sell signal was given in the last week from a 'shooting star' pattern in the weekly candlestick chart for the Nasdaq Composite.
What reinforces this sell signal is that the Nasdaq Composite is now both right up against the resistance level at upper trend line in the long-term rising trend (cf. chart), and at the same time various momentum indicators (weekly charts) show a heavily overbought situation for the Nasdaq Composite.
The overall technical picture for the Nasdaq Composite now indicates that this one of the world's most important stock market indexes, the Nasdaq Composite, may be facing such a 'typical' correction which comes in at around 7-12 per cent down, and within the rising trend.
In any case, no one should be very surprised if such a correction were to occur in the coming weeks and months for the Nasdaq Composite Index (^IXIC).
According to the long-term rising trend that the Nasdaq Composite Index (^IXIC) is moving within (cf. chart), a correction down to somewhere around 16,000 - 17,000 is now being signaled for the Nasdaq Composite.
On Friday 12 July 2024, the Nasdaq Composite ended at 18,398.
So if there should now be a correction down towards 16,000 - 17,000 for the Nasdaq Composite, it would therefore mean a correction of precisely around 7-12 percent down from today's level at 18,398.
We all know that there will occasionally be some slightly larger corrections of typically between 7-12 per cent, and even if the underlying trend for indices or shares can be positive.
Now the time may have come for this type of correction, and for the very important American stock market index Nasdaq Composite.
Technical Analysis of the Nasdaq Composite Index (^IXIC)
If we look at the weekly charts for the Nasdaq Composite (^IXIC), a clear sell signal was given in the last week from a 'shooting star' pattern in the weekly candlestick chart for the Nasdaq Composite.
What reinforces this sell signal is that the Nasdaq Composite is now both right up against the resistance level at upper trend line in the long-term rising trend (cf. chart), and at the same time various momentum indicators (weekly charts) show a heavily overbought situation for the Nasdaq Composite.
The overall technical picture for the Nasdaq Composite now indicates that this one of the world's most important stock market indexes, the Nasdaq Composite, may be facing such a 'typical' correction which comes in at around 7-12 per cent down, and within the rising trend.
In any case, no one should be very surprised if such a correction were to occur in the coming weeks and months for the Nasdaq Composite Index (^IXIC).
According to the long-term rising trend that the Nasdaq Composite Index (^IXIC) is moving within (cf. chart), a correction down to somewhere around 16,000 - 17,000 is now being signaled for the Nasdaq Composite.
On Friday 12 July 2024, the Nasdaq Composite ended at 18,398.
So if there should now be a correction down towards 16,000 - 17,000 for the Nasdaq Composite, it would therefore mean a correction of precisely around 7-12 percent down from today's level at 18,398.
Note
There was a not entirely unexpected correction down here for the Nasdaq Composite, and now the million dollar question is, what now and where will the Nasdaq Composite go from here and now?
The answer to that we all wish we had, but no one does.
When the market is very volatile and unsettled, as it has been in recent days and weeks, I tend to put on the long glasses and focus on the bigger picture for stocks and indices.
I have now done that here with the Nasdaq Composite today and after recent days of turbulence on the stock exchanges around the world, and for the Nasdaq Composite.
It is fear of a recession that is plaguing the markets now, and there are many fundamental key figures that speak for the possibility of a recession, but the positive thing is that recessions do not usually last forever, but it can be brutal on the stock exchanges while standing for a few quarters.
Back to this with looking at the slightly bigger picture, and here for the Nasdaq Composite index.
Here a weekly chart and with a 200-week moving average.
It is known to everyone that the 200-day moving average on the daily chart is very popular and very widely used in technical analysis.
However, not many people see the value of using a weekly chart with a 200-week moving average.
I have marked here all the way back to 1985 and shown quite clearly I would think that, as here for example the Nasdaq Composite, such corrections sometimes get down to the 200-week moving average, and very often turn up again from there.
But not always, and that is marked with green arrows here.
The question we are all asking ourselves now is, of course, what now? Where will the market and the Nasdaq Composite go from here on out?
Personally, I think we are not done with the correction we are in here now, and I imagine that there will likely be a test of the 200-week moving average and down towards the lower trend line in the marked long-term rising trend here (blue lines).
If that happens, it means that the Nasdaq Composite will go down to around 14,000 points or thereabouts before this correction is over, maybe over.
Should there be a break below the 200-week moving average, then we might see such a bigger drop and perhaps all the way down towards around 8,000 points for the Nasdaq Composite.
So a drop of around 50% from Monday's level around 16,200 points.
My experience over 35 years is that when the market gets such extreme volatility as now, and for example the Nikkei index falls 12 percent one day and rises 10 percent the next. Then my experience is that it is often not over so suddenly and then everything is just as before and well and good again.
So I don't have a definitive answer here, and neither does anyone else, and about where the markets and the Nasdaq Composite index are going to go from here on out.
I need to at least see that it actually takes around these levels and a little more than a day or two.
As you know, it is often a bad idea to catch a falling knife.
I am, as my analysis shows here today, yes, I am now uncertain, and I am certainly not alone in being so.
I'm inclined to think we're not done with this correction yet, and envision us going down and testing the 200-week moving average and lower trendline in the long-term uptrend for the Nasdaq Composite.
We all see that historically such corrections come down to the 200-week moving average from time to time, and that there are often good buying times around those levels.
So if the Nasdaq Composite gets down to around 14,000 points or thereabouts and down towards the 200-week moving average and lower trendline in the long-term uptrend, then yes, I would be more comfortable buying than where we are now.
I also see a danger that we get a break down below the 200-week moving average, and then there could be a fall all the way down to the 8,000 level for the Nasdaq Composite as I consider it.
Just sharing my thoughts here and what I think, but by all means, I'm not sure of my case here, but I think the Nasdaq Composite will go down to around the 14,000 level, and maybe even down to around the 8,000 level.
I will come back with follow-up analyzes in the future here, both around the Nasdaq Composite and other indices and shares.
I would recommend everyone to adopt and look at 200-week moving averages for both stocks and indices in their analyses. You will soon see that it is well worth keeping an eye on, and it is not quite rare that things turn from there during the major corrections.
You are welcome to visit StockCharts365.com and read more technical analyzes there about shares in the US, shares in the Nordics, important stock market indices, currencies, cryptocurrencies and commodities.
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