Crunch Time for the Nasdaq 100

The Nasdaq 100 moved sideways for nearly 4 months to end 2016. Prior to that it had moved sideways in a wider range for 7 of the prior 8 months. That was a lot of built up frustration with equities. But then with the new year it broke to the upside and ran over 13% higher in 2 months. It paused again for 6 weeks and then added another 10%. That took it to the 143.90 top in early June.

But since then it has moved lower. A quick 2 day drop found support and bounced, but to a lower high. The fall back from there found support last week at a lower low. A lower high followed by a lower low defines a downtrend. The question then is how low will it go? For the Nasdaq 100 ETF, $QQQ, it seems the key lies in the 136 price level. As I write Tuesday morning the QQQ is pulling back in the pre-market so crunch time might upon it.

The signs are there that this could be both ‘The Top that’ every pundit has been calling for for years, or the end of a mild pullback. The volume build on the move lower has been large. Measured against the volume from the start of the run higher in January it would capture over 2/3 of it. Building volume, coupled with falling momentum and price are the focus of the Top callers.

But the momentum story may be turning. The RSI is holding in the bullish range, over 40, and in fact reversed and is moving higher. Continuation would give more weight to the narrative of a mild pullback to be bought. So does the MACD which has reset from high levels to a negative value and is now turning up towards a cross up. That would be a bullish buy signal. And the volume pile is a bit smaller in the second leg down. Perhaps exhausting sellers?

So which will it be? We will have to wait and see. A break under 136 bolsters the case for top callers. It would take a move over 142.29, the June 26 high, to a higher high, to get the reversal argument in full gear. Until then it is watch time. Crunch time.

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