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Diagnosing the Nasdaq: The Damage Report

TVC:NDQ   US 100 INDEX
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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