Nasdaq challenging support for a third time

Well the Nasdaq wasn't able to break through 16,000 resistance, it's now looking at cutting below 14,900 support.  The 200-day MA is nearby at 14,681 and is looking a more likely support test that maintaining current levels. 

Not surprisingly, there was an acceleration in the relative loss of the Nasdaq to the S&P with technicals net bearish.  Volume is a balance between sellers and buyers and the likelihood is that we have trading range in development.

The S&P drifted below breakout support of 4,710 with the next support level at the rising channel. Near term technicals are bearish, but momentum is still holding above the bullish mid-line.  The index is outperforming the Russell 2000, which is not great news for bulls in the long run.

The Russell 2000 had already failed in its attempt to clear double-bottom neckline resistance, and now finds itself heading back to support of the double bottom. Technicals are mixed, we have a MACD trigger 'buy' but bearish technicals elsewhere. We also have an outperformance against the Nasdaq which means it's not without opportunity. 

If there is a chart to watch over coming weeks it's this combination of breadth metrics for the Nasdaq. The Percentage of Nasdaq Stocks above the 50-day MA has already reached oversold territory. The Percentage of Nasdaq Stocks above the 200-day MA is close to oversold. The Nasdaq Bullish Percents still has room to run before becoming oversold.  The Summation Index is also close to oversold, if it gets below -800 it will have reached a level typical of major swing lows. 

For the coming week, we need to see how support holds - particularly for the Nasdaq - and see how this changes supporting breadth metrics which will help mark a swing low. 

You've now read my opinion, next read Douglas' blog.

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