Nasdaq (NDX QQQ) More work to do than the S&P but on course for fresh records, key chart levels

• Nasdaq remains in buy any dip mode as it lags the S&P.
• Small resistance at 13,800  should give way to new highs.
• Double bottom in place from May 12 and May 19.

The Nasdaq continues to steady itself for a push to new highs as long as it remains in the current bullish setup. Clearly identifiable are the classic higher lows and higher highs. The Nasdaq is also trading  above its 9 and 21-day moving averages so the short-term trend is bullish, while the 200-day moving average, an  indicator of the longer-term strength, is miles below current levels.  

NASDAQ forecast  

Last Thursday’s small little wobble was quickly corrected by Friday’s strong price action, helped by a benign employment report.   Thursday saw the 9 and 21-day moving averages broken in what appeared to have bears getting roused. But Friday’s action was helped by the fundamental data with yields dropping and talk of tapering and rate rises pushed further out the time horizon. The May 7 high of 13,814 now offers some interim resistance before a push for new highs. This recent move was instigated by the bullish double bottom from May 12 and 19 with corresponding divergences from the momentum oscillators, Relative Strength Index (RSI), Commodity Channel Index (CCI) and Williams %R. A bullish divergence occurs when the stock or instrument makes a low but the RSI, CCI, and or Williams %R does not make a confirming/corresponding low. In this case, none of the three RSI, CCI or Williams %R made a corresponding low on May 19. 13,469 is holding the short-term bullish trend. 13,000 holds the longer-term bullish pivot. The Moving Average Convergence Divergence (MACD) remains in a bullish crossover and the momentum oscillators are in neutral territory.  

The strong consolidation support zone identified by the purple box area worked well back in mid-May as the Nasdaq found strong buyers. A consolidation zone has strong price discovery and should lead to stabilization on a retest. The break from this zone back in March 31-April 2 was accompanied by some gap ups with limited price discovery. It was no surprise then that on the way back down on May 10-12 that the sell-off intensified as there was no price discovery to halt the slide.  

Above 13,800 is a consolidation area to the test of new highs may be slow and steady.

Zooming out on the chart a bit gives us a clearer view of the longer-term picture and the strong trend in play since the pandemic lows. The Nasdaq has been held nicely by the uptrend from the October 30 low and this trend line was retested and held on March 5 and May 19. So this is currently a strong support line but is now at 13,200, a strong support zone to try long positions if we traded down there. But short-term above 13,469 and the risk reward favours bulls.