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Nasdaq Holds Clue to Market’s Next Move

If the Nasdaq can close higher today, a new leg up will have begun


Was it good news or bad news yesterday that sent market into a downward spin? Actually it was both: The Federal Reserve’s most recent policy meeting indicated that the economy has shown so many signs of recovery that any further stimulation may not be needed. 

Stocks were flat prior to the announcement, but fell sharply after it, recovering about half of the fall in the last hour of trading. At the close, the Dow Jones Industrial Average was down 65 points to 13,200, the S&P 500 fell 6 points to 1,413, and the Nasdaq lost 6 points at 3,114. The NYSE traded 816 million shares, and the Nasdaq crossed 487 million. Breadth was negative on both exchanges with decliners ahead by about 2-to-1.

In addition to the Fed’s statement, investors had to stomach another round of European weakness. This time “the focus was on Spain’s sovereign debt crisis and whether the country can cut its deficit while battling with a slumping economy and soaring unemployment,” according to The Wall Street Journal.

To U.S. stock and futures owners, yesterday seemed like last fall all over again with another of the European Union’s junior citizens in financial trouble and money fleeing to the U.S. dollar. 

UUP Chart
Click to EnlargeTrade of the Day Chart Key

The upside reversal in the PowerShares DB US Dollar Index Bullish Fund (NYSE:UUP) from about $21.80 may not look like much, but it is important since the recent downtrend appears to have halted exactly at the 200-day moving average and the bullish support line. Yesterday’s pop halted at the 50-day moving average, but the near-term trend has changed and that could put additional pressure on U.S. stocks, gold, crude oil, etc.

Nasdaq Chart
Click to Enlarge

Despite the Fed’s decision to back away from further stimulus and Europe troubles, the Nasdaq is still holding onto a very sharp uptrend line. After closing a recent continuation gap, yesterday’s intraday high was higher than Monday’s high, and if the Nasdaq can close higher today, a new leg up will have begun.

Conclusion: Thus far, the bull has marched on despite the Fed, Europe, and a host of other negatives. But if the Nasdaq fails to make another new high soon, look for a pullback to its trendline and then the support line at 3,000. But so far it seems that nothing can stop the bull.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.

Article printed from InvestorPlace Media,

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