Diagnosing the Nasdaq: The Damage Report
All good things must come to an end. Is that finally true for the Nasdaq-100 after nearly two years of steady gains?
The main pattern jumping off this chart is the double-top around 16,600. A large bearish engulfing candle appeared there on November 22. NDX then pulled back, bounced and proceeded to make a slightly lower high in same area immediately after Christmas.
Interestingly, the S&P 500 hit a new record high at the same time. NDX’s lack of follow-through wasn’t a terrific sign for the bulls.
Next, a trend line started in November 2020 and ran along the lows of March, May and October. Prices just bounced there, but with very limited follow-through. They weren’t even able to get back to the 50-day simple moving average (SMA). They also stalled at the 21-day exponential moving average (EMA) – a potential sign that the short-term trend has turned bearish.
The 100-day SMA is potentially important as well, providing support at every big pullback since November 2020. But like the trendline, it’s also under pressure.
Next, chart watchers may be eyeing the 15,900 area because it was a high in September and the low twice in December. But yesterday NDX closed back below it. Old resistance might have become new support -- but only briefly.
Finally you have the macro backdrop with bond yields rising. Traders may keep an eye on the 10-year Treasury yield and shun NDX’s high-multiple growth names on a break above the recent high around 1.80 percent.
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The main pattern jumping off this chart is the double-top around 16,600. A large bearish engulfing candle appeared there on November 22. NDX then pulled back, bounced and proceeded to make a slightly lower high in same area immediately after Christmas.
Interestingly, the S&P 500 hit a new record high at the same time. NDX’s lack of follow-through wasn’t a terrific sign for the bulls.
Next, a trend line started in November 2020 and ran along the lows of March, May and October. Prices just bounced there, but with very limited follow-through. They weren’t even able to get back to the 50-day simple moving average (SMA). They also stalled at the 21-day exponential moving average (EMA) – a potential sign that the short-term trend has turned bearish.
The 100-day SMA is potentially important as well, providing support at every big pullback since November 2020. But like the trendline, it’s also under pressure.
Next, chart watchers may be eyeing the 15,900 area because it was a high in September and the low twice in December. But yesterday NDX closed back below it. Old resistance might have become new support -- but only briefly.
Finally you have the macro backdrop with bond yields rising. Traders may keep an eye on the 10-year Treasury yield and shun NDX’s high-multiple growth names on a break above the recent high around 1.80 percent.
TradeStation is a pioneer in the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more.
Important Information
TradingView is not affiliated with TradeStation Securities Inc. or its affiliates. TradeStation Securities, Inc., TradeStation Crypto, Inc., and TradeStation Technologies, Inc. are each wholly owned subsidiaries of TradeStation Group, Inc., all operating, and providing products and services, under the TradeStation brand and trademark. When applying for, or purchasing, accounts, subscriptions, products and services, it is important that you know which company you will be dealing with. Please click here for further important information explaining what this means.
This content is for informational and educational purposes only. This is not a recommendation regarding any investment or investment strategy. Any opinions expressed herein are those of the author and do not represent the views or opinions of TradeStation or any of its affiliates.
Investing involves risks. Past performance, whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. There is a possibility that you may sustain a loss equal to or greater than your entire investment regardless of which asset class you trade (equities, options, futures, or digital assets); therefore, you should not invest or risk money that you cannot afford to lose. Before trading any asset class, first read the relevant risk disclosure statements on the Important Documents page, found here: https://www.tradestation.com/important-information.
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