It’s a neck brace market from all the back and forth.
Last week, we mentioned that the NASDAQ was likely to bounce higher because it entered oversold territory. The index has gone straight up since last Wednesday and broke through its 50-day moving average with ease. Truthfully, we didn’t believe Bull would be able to pass the 50-day benchmark without a fight.
The index did break its recent descending trendline. That’s usually a good sign and the 50-day mark is right below, which should provide support. Although, the key technical line has put up less of a fight than Kevin Holland in this past weekend’s UFC co-main event.
There are a trio of hurdles the NASDAQ needs to pass for us to feel last week’s pivot was the beginning of a new uptrend.
- The index has some technical resistance straight ahead and will need to overcome 12,300ish
- Another layer of resistance comes into focus at 12,600-12,650
- Then finally, the index needs to pass its recent cycle high in the neighborhood of 13,200ish, which would also put the NASDAQ ahead of its 200-day average.
Technically speaking, it is considered bullish when an index/stock/ETF… is trading above its 200-day line. It’s more bullish if the moving averages line up with the shortest on top. Right now, the 50-day line and the NASDAQ is below the 200-day moving average.
There is one other bullish scenario we will be watching: sellers decide to get in the game, knock the NASDAQ down some, but not below 11,500. Afterwards, buyers regain control and set a new cycle high; walking up the steps as we put it.
The bearish story is as simple as it gets. If the NASDAQ closes below 11,500, then it’s highly likely we test mid-June’s lows.
For now, we don’t have any conviction for the bull or bear case. We’ll wait for the market to pick one of the options we outlined above. Either way, the next leg is likely to be aggressive.
Usually, Technology and Healthcare do well when the market roars higher and that was the case last week. Technology dominated our sector leaderboard with six of the top spots on our sector/industry leaderboard. Healthcare held down three of the remaining four with Metals and Mining barely holding off Internet Stocks for tenth place.
If/when we get one of the two technical buy signals we are looking for, Technology is likely to be one of the top performers if the NASDAQ rolls higher.
Ditto here, get a buy signal and we’ll have a tech company to take up this space.