NASDAQ Composite Index (IXIC)

More Trouble Ahead For The NASDAQ Composite Index?

Posted in NASDAQ Composite Index (IXIC) on April 21st, 2014 by admin – Be the first to comment

By Jim Donnelly, Olson Global Markets
Although the NASDAQ Composite Index (IXIC) has already dropped by 8.50% from its 4,371 high set on March 7th, a break below key upward sloping trend line support now at 3,920 would likely trigger another round of technical selling. In addition, overbought conditions on longer term (monthly) charts underscore the bearish intermediate-term case for the IXIC.

If a break below support at 3,920 did unfold, the NASDAQ composite Index could potentially test key “cross” trend support currently sitting at 3,580. Such a move would represent another 10% decline on the IXIC from current levels and an overall tumble of more the 18% from its March 7th high. (Note: this same “cross” trend held as support between 2003 and 2008 before breaking solidly below it in 2008).

This outlook, of course, is purely technical in its assessment of price activity on the IXIC. Nevertheless, the recent rotation out of momentum stocks and into lower beta sectors of the equity market does not yet appear to be over. Fundamentally, worries over deflation or at least the absence of inflationary pressures in Europe remain an issue. Political uncertainty regarding Ukraine continues to be troubling as well.

Still, a possible 18% correction might actually be welcomed by investors who have maintained a higher than normal amount of cash. Moreover, such a pullback in equity prices could sent interest rates lower which, in turn, might spur a lift in mortgage activity, home buying and new construction starts. In the end, such an outcome would likely boost economic activity in general and a healthy rise in GDP in the not-too-distant future.


NASDAQ Composite Index Approaches Major Resistance

Posted in NASDAQ Composite Index (IXIC) on February 20th, 2014 by admin – Be the first to comment

By Jim Donnelly, Olson Global Markets

With the first testimony of new Fed Chair Janet Yellen completed and with an agreement over the debt ceiling already reached, equity prices extended higher last week despite many overbought conditions being observed.  Still, higher levels are possible before running up against major trend line resistance. One such case is the NASDAQ Composite Index (IXIC), which ended the week at 4,244 following seven consecutive daily gains.

Technically, monthly stochastic oscillators and the current reading of the monthly Relative Strength Index (RSI) are at rarefied levels, as is the index itself. That said, major trend line resistance currently sits at 4,505, which is 3.8% higher than the close of Friday. Another factor to consider, is that the afore mentioned trend line is upward sloping which suggests that the exact resistance level will also rise as time goes by.

Nevertheless, a reading above 97 on monthly stochastic studies is a feat not often reached. In addition, the last time monthly RSI reached the 83-to-87 range (where it has been sitting since December 31, 2013) was between December 31, 1999 and February 29, 2000. Such a condition suggests that profit-taking, or at the very least a hedging strategy (using options perhaps) might be in order given the current technical set-up.