The NASDAQ index sits exactly at a key price support zone, the break of which will increase the odds for significant downside, but should the index support at this level, can an “all clear” signal be given?
I’m sure you’ve seen prettier charts, but the fact remains that the NASDAQ sits at a key level that bulls have a second chance to defend.
The index is in a confirmed daily downtrend, but this level served as key support in the past in the form of a Key Reversal day on significant volume.
Should the bulls (buyers) fail greatly at this level, it would be difficult to conceive of a scenario where the odds would favor continued price advancements.
Let’s look at the weekly chart to see if we can gain any additional insights:
Actually, the weekly chart looks much more bearish than the daily chart, in terms of the dual trendline break combined with a significant “two close beneath” the 50 period (roughly one year) moving average.
This means that price is beneath the average price gathered over a one-year period, and the 50 period MA has served as key support for any major price corrections.
As you can see from the May/June market correction of 2006, the 50 period average was shattered yet price failed to make significant new lows and then shortly meandered its way back above the 20 and 50 period averages, setting the stage for a new rally.
The same could absolutely happen this time, but as always, we take what signals are given from price, volume, time, and key indicators, and at the moment, it seems the momentum is clearly on the side of the bears (sellers).
In terms of the price/trend structure, weekly price has formed a lower high AND a lower low AND broken support from key moving averages.
I must note that the orientation of the moving averages is still currently “very bullish,” but recall that virtually all indicators lag price and give late signals.
A “Very Bullish” orientation of the moving averages means that the 20 period is above the 50 period, and that both are steadily above the 200 period average.
Gosh, we live in fun times, don’t we?