Don’t Get Fooled Again, No, No

Well, we got what we were hoping for. Last week we were hoping for some profit taking that reversed higher before NASDAQ 10,250 – check. The index slipped a little below its 50-day moving average of 10,923 and rebounded.  Our hope was the rebound would extend past and close above the near-term cycle high of 11,250 – check.

The downtrend that started in the middle of December is officially over. The stepping up action with a higher low followed by a higher high is exactly what we wanted to see. It’s the start of a potential uptrend. However, always a buzzkill somewhere, we can’t go full green light bullish just yet.

As you’ll see on the chart below, the NASDAQ has traded in a bi-level box since the middle of last September. The upper chamber’s range is 11,000 on the bottom and 11,500ish on top. The lower level spans from 10,250 to 11. Combined, the NASDAQ has bounced back and forth between 10,250 and 11,500 for the last three and a half months.

NASDAQ

While our belief pattern is absolutely moving the needle towards bullish, we must remain vigilant. The danger of falling to the bottom of the box remains until the NASDAQ gets beyond the top guardrail, which coincides with the index’s 200-day moving average.

On the second chart, you can see the NASDAQ has looked up to the 200-day benchmark for more than a year. Bulls were thwarted twice in 2022 as they moved into the 200-day’s zip code. Both times the failure was followed by a lower low.

While we are encouraged by the NASDAQ stepping up and following the playbook for a potential uptrend, it’s prudent to wait for the index to break the cycle and get out of its box beyond the 200-day. Like the Who sang, don’t get fooled again, no, no.

SECTOR VIEW:

Per usual, when the NASDAQ does well, technology does well; taking hold of six of the top seven performers on our sector/industry leaderboard. ARK Next Generation Internet ETF (ARKW) sat atop the mountain, gaining more than 2.73%. SPDR S&P Oil & Gas Exploration & Production ETF (XOP) was the only non-tech exchange-traded fund (ETF) in the top seven at number two.

Sector investors might want to wait for the NASDAQ to close to the plus side of the 200-day mark before committing to new tech ETF holdings.

STOCK VIEW:

We are this |–| close to going on offense again. But we cannot be an impatient quarterback and force the ball in a hurry to make something happen. We’ll wait for the NASDAQ to run into the clear and hit our targets on the numbers.

Rich Meyers
Investing Trends