A Long Term View On…. The Nasdaq 100
- Posted by Greg Harmon
- on January 3rd, 2013
The first thing that comes to mind when someone mentions the Nasdaq 100 ($NDX, $QQQ), is the crash of 2000. Even if you are only in your twenties you are constantly reminded of how high valuations got and how quickly it all came crashing down. Since then though it has been moving slowly and steadily higher, with the exception of the period around the 2008-2009 financial crisis. The monthly chart below shows the recent pause happening at the 23.6% Fibonacci retracement of the crash move lower. It is also at the Measured Move comparable to the run off the bottom to the 2007 top, near 66. A natural place for some resistance. It is being wedged in by the Median Line of
the bullish Pitchfork which is carrying it higher, paralleling the 20 month Simple Moving Average (SMA). A glance at the Relative Strength Index (RSI) shows that it is bullish and has been holding over 60. On this longer timeframe this looks very bullish with the next real resistance at 82 and then 101. Zooming in the weekly picture shows those signs of consolidation or trouble a bit more clearly. The rising trend since the 2009 low was only recently broken and a sideways range has been playing out since the beginning of the year between the 123.6% and 161.8% Fibonacci extension of the retracement of the move lower during the financial crisis, between 61.08 and 70.69. The
current swing looks higher with support from the rising RSI which held in bullish territory on the latest dip and the Moving Average Convergence Divergence indicator (MACD) that is crossing to positive. A move over 70.69 is required to turn this bullish longer term and out of neutral. Of course a drop under 60 would set the course lower. Zooming in one more time sees the daily chart building an expanding wedge around the SMA with Wednesday’s activity pushing through the top and over
the 20 day SMA. A continued hold of the close over the wedge at 67 and then move over 68 would seal the deal. And with a rising and bullish RSI and a MACD that is positive, it has support for more upside. So key levels to watch going forward are 67 and 68 on the short term followed by 70.69 in the intermediate term and finally 82 and 101 longer term. All bets are off on the upside on a break below 60.
This is the eleventh in a series of A Long Term View On …. articles.
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Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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