Forget Nasdaq 5,000, Watch These Numbers Instead

A lack of corporate and international news on Thursday attracted few market participants. The major indices closed flat to lower with the exception of the Nasdaq, which gained 0.4%. This put the tech-heavy index within 1.2% of its record closing high made 15 years ago at 5,048.62.

Volume was again on the light side, a reflection of decreasing fears over Greece’s bailout woes and an end to Q4 earnings season.

Another negative for the major indices was a continuation of the decline in oil prices. Crude futures fell 5.3%, closing at $48.30 a barrel. The energy sector closed 1.9% lower.

It was a strong day for technology stocks, led by Apple Inc. (NASDAQ:AAPL), Google Inc (NASDAQ:GOOG) and Facebook Inc (NASDAQ:FB), which rose between 1% and 2%. Emulex Corporation (NYSE:ELX) popped nearly 25% on news it is being acquired by Avago Technologies Ltd (NASDAQ:AVGO) for $8 a share. And, inc. (NYSE:CRM) jumped 12% following a 26% increase in quarterly revenues.

Initial claims increased to 313,000 versus an expectation of 290,000. The CPI index fell more than expected in January, dropping 0.7% versus the consensus estimate for a 0.6% decline. Durable goods orders came in above expectations of a 1.7% increase, rising 2.8%.

Gold futures were up 0.7% to $1,209.60 an ounce. The 10-year U.S. Treasury note fell, with its yield rising to 2.02% from 1.97% on Wednesday.

At Thursday’s close, the Dow Jones Industrial Average fell 10 points to 18,214, the S&P 500 fell 3 points at 2,111, the Nasdaq gained 21 points at 4,988, and the Russell 2000 rose 4 points to 1,239.

The NYSE’s primary market traded under 7 million shares with total volume of 3.4 billion. The Nasdaq crossed 1.9 billion shares. On the Big Board, decliners outpaced advancers by 1.2-to-1. On the Nasdaq, advancers led by 1.3-to-1.

Nasdaq Chart
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Chart Key

The press is enamored with Nasdaq 5,000, despite the round number’s lack of technical importance.

There are two important numbers to the technician, the old closing high at 5,048.62 and the upper Bollinger Band at 5,011.80. In the past 15 months, the Nasdaq fell back from the upper band five times, retracing at least to the middle of its bullish channel.


There is sufficient evidence to indicate that a pullback is likely whenever the Nasdaq touches its upper Bollinger Band while getting close to its bullish resistance line. The bullish resistance line is at approximately 5,000 — the big, round number that fascinates the press. To me, this appears to be the area to do some profit-taking since the bulls have stumbled at this line many times before.

Caution is again warranted, but long-term investors should continue to hold their high-quality securities. Traders and speculators, however, can now sell their overpriced holdings.

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.

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