Nasdaq: Will Index Put the Bear Case to Bed This Week?

For a while, it was looking like bulls were going to deliver on the pent up demand that is lingering in the market, but for now, this is on hold for another day.

I had talked about the potential bearish case for the Nasdaq in my last post, and in early trading, I had thought this effort was going to do to waste. But the bearish case remains valid as of the close of business on Friday.

The Nasdaq has a MACD trigger 'sell', to go with higher volume accumulation, off a bearish "gravestone doji".

The index has continued to accelerate its relative performance against peer indices, and if it can post a gain early week it may yet put to bed the bearish case for this index; a close above 18,700 should be enough.

Nasdaq Composite Daily Chart

The Russell 2000 (IWM) finished with a bearish engulfing pattern with the 20-day MA now looking to play as resistance. Meanwhile, the 50-day MA still available as support.

Volume climbed to register as distribution. If there is a loss of the 50-day MA I would be next looking at the 200-day MA as an area for buying, but with three such tests since August I would not be looking for such support to hold.

IWM-Daily Chart

The S&P 500, the most bullish of the indices, had rallied to a possible 'bull flag' breakout, only for the index to drift back into the consolidation.

Technicals are mixed with 'sell' triggers in the MACD and On-Balance-Volume. Despite pushing new highs, the index is underperforming relative to its peers.

The index is holding 20-day MA support and if there is to be a return to the 'bull flag' breakout, then buyers have to step in here; further losses that deliver a loss of the 20-day MA will mean a retest of 5,670 is favored.

SPX-Daily Chart

For this week, bulls will need to repeat early Friday trading, because losses from here will negate the 'bull flag' in the S&P and effectively confirm resistance in the Nasdaq.