E-Mini Nasdaq 100 Daily Chart – Nasdaq Composite Members Above Their 200DMAs
Nasdaq formed a bullish flag and found support from the 200-day moving average. Now, the index is attempting to hold above the flag’s downtrend channel, but the bond market is giving caution signals. Yesterday’s 30-year government auction raised some warning flags as the bid-to-cover ratio fell to 2.24. Following the auction, stocks retreated, and the dollar index rose. Additionally, the Fed’s reverse repo usage dropped below $1 trillion for the first time in two years.
Another warning sign is that the recent surge in Nasdaq did not come with broad participation. Only 25% of Nasdaq composite members are above their 200-day moving average. The bottoms of the post-COVID trend occurred nearly simultaneously with the members > 200 DMA index hitting bottoms. Both times, Nasdaq was below its 200-day moving average and rose with the general participation of members, particularly in the post-COVID surge of 2020.
During the formation of the flag, this index fell rapidly while Nasdaq stayed above the 200 DMA and remained relatively strong, indicating that the Nasdaq index is carried mostly by heavyweights.
E-Mini Nasdaq 100 Daily Chart
Despite some warning flags, the technical outlook is looking strong, and the possibility of rate cuts coming closer than expected is giving hope to the stock bulls. If Nasdaq can hold the gains and pass the 15,395 resistance, the ride towards the north might continue to 16,170 – 16,800 targets. As for the downward moves, 15,070 and 14,800 are the key support levels for the short term. However, the main support will be the 200 DMA, and as long as it holds, despite the warning flags, any downward corrections can only stay as buying opportunities for bulls.
