A trio of related thoughts come to mind when looking at the NASDAQ’s chart:
“If at first you don’t succeed, try, try and try again” – Thomas H Palmer
“Knock, knock, knocking on Heaven’s Door” – Bob Dylan
“If you spend enough time in a barbershop, eventually you’ll get a haircut” – Denzel Washington
The NASDAQ is spending plenty of time in the 50-day moving average barbershop, knock, knock, knocking on the benchmark, trying to successfully go on by. All of which brings to mind a Pink Floyd lyric, “no matter how hard he tried, he could not break free.” I couldn’t quite figure out how worms fit in, so I’ll stop there.
Busting past the 50-day mark on the chart is proving to be a difficult task, as we thought it might be. However, a pair of converging trends could put Wall Street in a binary buy or sell position soon.
The descending 50-day average and the rising trendline connecting recent bottoms are on a collision course. It’s been our experience; decision points tend to cause the market to move decisively in one direction of the other. To the victor goes the spoils as William Marcy put it.
If the NASDAQ finally gets in the barber’s chair and breaks beyond the 50-day average, it will have knocked down resistance and should successfully push higher after a couple of tries. On the other hand, if the index drops through the bottom trendline, then we are likely to revisit June’s lows in relatively short order.
We don’t want that. It would mean the NASDAQ is in a different barbershop, knock, knock, knocking on a different door where success means the possibility of a deeper bear market.
For now, we’ll continue to sit in the waiting area, listening to a little Bob Dylan watching to see if bulls or
bears successfully win the impending battle of trendlines. To the victor will go the spoils.
Semiconductors were the top performing industry last week and where we’d go first if/when the
NASDAQ chooses the bullish scenario outlined above. 5G was the second-best performer and another
that would likely perform well if the market goes higher.
Put SPDR S&P Semiconductor ETF (XSD) and Defiance 5G Next Gen Connectivity ETF (FIVG) on your
We are waiting for the go signal. When we get it, we’ll probably put a semiconductor stock here that
benefits from the 5G network.
This phase of the cycle is likely to end soon with a pop or drop.