Pivot, pop and drop, that describes the last three days of trading for the NASDAQ. The new week started out on the plus side and then lost strength right as the index made contact with the upper end of its declining trading range.
Weakness might continue for the next few days but there are a couple of potentially bullish technical signals on the immediate horizon. Shorter-term, the NASDAQ is on the verge of positive MACD crossover. The last time we saw this signal was at the start of 2023 which kickstarted a rally that took the NASDAQ from roughly 10,400 to 12,200.
It’s the second possible buy signal that should catch the attention of investors. The NASDAQ is on the edge of what’s called the Golden Cross. That’s when the 50-day moving average crosses from below to above the 200-day average. The last time the index experienced the Golden Cross was in May 2020 as the market was coming out of the COVID crash. The index rallied from approximately 9,000 to more than 16,000 during the next 19 months.
A couple of plus days and there is a chance the NASDAQ gets a one-two punch of a bullish MACD crossover followed almost immediately by a Golden Cross. Although nothing is a perfect predictor, the combination would be viewed as a big plus for stocks by chart watchers.
Although we can see two positives for stock on the horizon, neither has happened yet. Investors need to exhibit patience before acting in anticipation of a bullish technical event. In more than 30+ years of experience, we’ve seen the market take a detour right before the promise land and whack investors who acted prematurely.
There is one scenario where we might jump the gun a bit. If the NASDAQ closes above the downtrend line that pushed stocks back on Monday, then it could signal the end of the recent selloff, which could potentially limit downside while we wait on the MACD and Golden Cross.
Commodities had the most representation at the top of our weekly sector/industry scorecard. SPDR S&P Metals and Mining ETF (XME) gained more than 7 percent on the week and SPDR S&P Oil & Gas Equipment & Services ETF (XES) added nearly 6 percent for the week. A quartet of tech exchange-traded funds finished up the back end of the top 10.
Unlike the previous week, Invesco QQQ Trust (QQQ) outperformed SPDR S&P 500 ETF Trust (SPY), which is positive in our view.
Like our take on the overall market, we think it’s best to wait for confirmation before hitting the buy button. If/when we get the one-two punch outlined above, technology ETFs will probably do a lot of the early heavy lifting.
If/when we get the go signal, we’ll have plenty of ideas for this spot too, stay tuned.