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Nasdaq index analysis
June 2018, 2019 & 2020 were green months for the Nasdaq and that trend is continuing this year. Having found all-time highs again after popping out of the end of May consolidation period, it seems the new futures contract is bullish the tech sector. What goes up must come down and it’s always great to be able to buy the dip. I certainly prefer to buy on a pullback than on a breakout to the highs.
A lot of yesterday’s price action in the Nasdaq occurred around the previous US sessions value area and we closed back inside that range as we sit and wait above 14,000 for the FOMC meeting minutes to be delivered tonight.
Inflation is rising and is way above the target set out by the Federal Reserve, but we’re now really aware that the Fed are likely to sit on their hands until they see significant positive changes in the labour markets and will be making decisions based on evidence. However, the fast money spike today will be on any wording changes that allude to Tapering or give a hint that the Federal Reserve are thinking, let alone talking, about being more Hawkish in the nearer term future.
With all-time highs come the promise of further gains as there is zero resistance above, so trending moves rely on momentum to keep rising to keep pushing onwards and upwards. The daily 20, 50 and 200 exponential moving averages are all stacked bullishly, and the averages are all curling upwards. If this momentum were to break, even temporarily, there are key levels and gaps below that would act as a good reference point to look for but the dip trades.
Last Friday was a tight market and the point of control around 13,956 would be the first reference I would have on my chart. The level was tested with Monday’s price action at the US session open and turned out to be the US session low of the day. There are several others from May below, which have potential to be tested still. Next target could be 13730.50, 13533.50, 13439, 50 and 13159.50 depending on how deep they can go.
Last week the overall sentiment of US investors was bullish but closely followed by the nearly as many, neutral market participants. To get some real moves either up or down we need those traders and investors to come off the side-lines and pick a direction.
The rising prices of Apple Inc, Microsoft Corp, Amazon and Google are certainly dragging this index higher and today they all opened green as they have been all June. Tesla is the only big 6 company to be in the red but that has found support around $600 and could easily be up $300 in the future based on deliveries of the new Tesla Model S Plaid. During the flagship EV car launch event, Elon Musk said, “There is something that’s quite important to the future of sustainable energy, which is that we’ve got to show that an electric car is the best car, hands down.”
The largest company in the index, Apple Inc. is still trading below the 2021 opening price as is Tesla but the other big names are trending higher now. For Amazon, the last 6 months have been very range bound and at the end of May it was announced that Jeff Bezos will formally step down as Amazon CEO on July 5th, 2021, before boarding a Blue Origin spacecraft with his brother as part of the first crewed flight of the Amazon backed space travel company.
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If there is a risk-off sentiment following the FOMC tonight, then the fall lower for the Nasdaq could be all the way back down to the daily 20 exponential moving average. The Ichimoku cloud is rising and will also act as support, so the longer we can hang out at these all-time highs the higher support from that particular indicator will come in.
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Tesla is in a wedge pattern with a strong base forming around $550-$560. If the share price does get back to the 2021 opening price then there will have been a clear breakout of the sloping trend line and that would signal a higher probability trade back towards the highs.
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Facebook has been moving higher for most of the year withing tight rising channels with quick sell offs which have been just as quick bought up. A break below the lower bound of the rising channel would be the first indication that the change in trend was more substantial and buy tests of previous swing lows would appear to be the trade plan for now.
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Google (alphabet) is another company that has traded for the majority of 2021 above its opening price and is in a nice rising channel. A break of a significant swing low or a fall below the channel lower bounds is the signal that something has changed technically, though fundamentally it is hard to see any reason other than anti-trust lawsuits that would bring the share price down any significant amount.
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Using the thing horizontal line at the 2021 opening price gives a clear indication of where mean reversion traders could target, should they wish to short the top of this range and go long at the bottom. Amazon has been treading water between $2900 and $3500 for a year now, so a significant breakout, retest and continuation pattern would be a start of a long trend higher.
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Microsoft shares are continuing to push higher and since the move above the years opening price the trend has been convincingly to the upside but with decent pullbacks for investors to keep averaging in. It will be interesting to see how much resistance the April swing high provides or whether the momentum accelerates through. I would rather wait for a break above and retest before continuation higher, than attempting to buy into this swing high.
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Apple can pull the Nasdaq around pretty much single handily and should the price action get above the down sloping trend line and signal a continuation move to the upside, we could have Nasdaq near 14,500 sooner rather than later. Obviously if the Apple Inc. share price were to drop below the rising trend line, that would be bad news for all involved.
