The Nasdaq’s Long-Side Odds Are Deteriorating By the Hour

The index is sitting at critical long-term levels

   
The Nasdaq’s Long-Side Odds Are Deteriorating By the Hour

With certain tech stocks on a relentless tear since the June reaction low in the broader indices, I wanted to take a closer look at the Nasdaq Composite Index for perspective. What I found — to no great surprise — is an index trading at a critical level (resistance) through the long-term lens, and a medium-term slope that most likely isn’t sustainable at this angle.

To visually present this better, I drew a chart of the Nasdaq Composite Index looking back to the year 2000, which is where the index hit an all-time high closer to the 5150 area — still much higher than where the Nasdaq currently trades.

compqweekly The Nasdaq's Long Side Odds Are Deteriorating By the Hour
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After bottoming in the autumn of 2002, the Nasdaq rallied sharply higher, only to hit a wall in late 2010 with the onset of the latest financial crisis. Despite a visually painful drop along with the rest of the market in 2008, the index managed to bottom in early 2009 at a relative higher low vs. the 2002 lows. This, from a long-term bottom-building perspective, is imperative to note.

The ensuing rally off the 2009 higher low this week has roughly hit the 61.8% Fibonacci retracement level of the entire selloff from the 2000 highs down to the 2002 lows. In other words, it took a little more than 13 years for the index to make good on just 60% of the cataclysmic decline from the top in 2000!

Closer up, on the daily chart of the Nasdaq, note that even during the May-June pullback, the index kept true to its November 2012 simple uptrend line. Since the June lows, the Nasdaq has now rallied almost 8% in a matter of 13 days, which seems a tad lofty.

compqdaily The Nasdaq's Long Side Odds Are Deteriorating By the Hour
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This week’s breakout of the index past its May 22 highs looks good on the daily charts, but this is where the longer-term picture and hence the multi-time-frame analysis comes in handy.

Understanding that the Nasdaq is now at or very close to an important resistance area on the long-term chart, coupled with a very steep rally over the past two weeks, is to understand that odds on the long-side are deteriorating by the hour.

Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free weekly newsletter here.


Article printed from InvestorPlace Media, http://investorplace.com/2013/07/the-nasdaqs-long-side-odds-are-deteriorating-by-the-hour/.

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