How Oscillators can you give you an edge.

Much has been said about the Nasdaq entering a new bearish phase, but to my mind the red flag warning signs were there technically from the beginning of the year. If we take a brief glance at the weekly chart, we can see the MACD indicator was below zero from mid-December 2021 onwards, when the market had only just reached a new high in November. The market was making a new high, but the oscillator was not confirming it, the weekly RSI had also diverged (this happens when price makes a new high BUT the oscillator does not) and with the MACD below zero - both were suggesting a serious loss of medium-term upside momentum.

Then to add to this negative picture we had the DMI register a sell signal, and this was further confirmed when the ADX broke above 25 in mid-January.

We took out the 15508 low in mid-January and closed below the 14385 October low. That was the confirmation that we needed that the bull trend was over. The definition of a bear trend is lower reaction highs and lower reaction lows – so as far as I was concerned technically, we were in a bear trend from mid-January.

Looking at the chart now, I can see that we sit this week just above the 38.2% retracement at 12947 (of the move from 2020-2021), and this is the next break point on the downside. Given our bearish indicators we can only assume that this is likely to give way and trigger losses towards the next major band of support offered by 10677/10595 (the 200-week ma, the 61.8% retracement and the September 2020 low).

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