Last week we thought that if the NASDAQ successfully cleared its 50-day moving average hurdle then the index would continue higher. Fortunately, we called that race right.
Stocks continued their move upward on Monday with the NASDAQ closing at its highest mark since the middle of February. It wasn’t long ago that the NASDAQ was on precipice of serious danger where one more step and it was over the cliff and into freefall. It got so close that pebbles were kicked over the edge.
In a 180-degree turn, today investors are thinking about how much higher can stocks go compared to how low can it go just 10 days ago. While Wall Street was on the verge of the unknown on the Ides of March, the NASDAQ’s chart is pretty clear at the moment.
In our opinion, it’s highly likely that the index continues the current trajectory until at least 14,500. That would complete a “V” pattern and it is where the NASDAQ ran into trouble before. However, the pull of the 200-day average might be strong enough for buyers to push the tech-heavy index beyond completing the “V”.
If/when the NASDAQ touches the 200-day benchmark, it will light up algorithms and likely triggers some profit taking. No matter when the selling starts, at the top of the “V” or at the 200-day mark, any downward move would probably result in the index flirting with the 50-day again. We’d expect support to emerge the closer the NASDAQ gets to 13,762. That neighborhood might prove to be in the right zip code to buy the dip.
We feel the odds are high that the 200-day is the near-term ceiling. If not, and the current rally moves beyond and closes above 14,725ish, then 14,500 could be the where the buy the dip zone begins.
Investors might consider using current strength to take profits on short-term holdings and underperformers and re-allocating the cash into market leaders on the dip.
Commodities roared back last week, led by Oil and Gas. Materials, Metals, and Mining were also top 10 performers on our sector leaderboard. However, the biggest winner of them all was ETFMG Alternative Harvest ETF (MJ), up more than 17% in the last week.
The marijuana fund has sputtered, started, and stopped a couple of times, head faking investors into believing the next bullish run is right around the corner. If MJ can close above $11.50, then the ETF might stop acting like its driving in rush hour traffic and head for open highways higher.
We are close, this I—I close to adding individual stocks back into this spot, but… we’ll wait to buy the dip. That way we are more certain that the markets have pivoted higher and possible started a new uptrend.