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Here we are in February already with a bullish move on the indices and many in the main stream are now calling a bull market. The major tech companies out of the US are responsible for fuelling the up move that began back in 2009. The likes of Google and Apple showed growth and stability when traditional old-style businesses were floundering and the GFC was potentially going to wipe them off the map.
The NASDAQ index has been an underperformer so far this year compared to the Dow and S&P 500, where there is a broad mix of companies and industries and the focus is not entirely technical. So, are the ‘techs’ now facing a growth profile limited by just how many more tablets, smart phones, desktops and laptops people can buy and how many more social media and internet browsing options can we actually use? I will leave that question to consumer and those who run the companies.
Let’s go to the charts and see what we can discern. In Chart 1 below we can see the recent price action on the daily bar chart has not been able to reach the 100% range target and is now in a prolonged sideways period. The current move is 43-days and the previous upswing was 33-days. It’s travelled less distance in price and more in time, which can be a sign of a slowing market. There was an attempted break out in the price action but last night’s close saw a return to the sideways range. A confident break to the upside would be needed here to call a strong bull. Maybe we will look back at this moment and realise it was the tech companies holding back the US market move.
Chart 1 – NQ-Spotv Daily Bar Chart
click to enlarge
Chart 2 is an excellent big picture clue as to the potential in the upside. Examining the range of the ‘tech wreck’ high to low, we can see that the price action has stalled at the 50% level. A confident break of this level would be confirmation of a new bull. Or perhaps we looking for a place for an orderly pullback.
Chart 2 – NQ- Spotv Monthly Bar Chart
click to enlarge
Chart 3 also focuses on the big picture from the 2002 low to the current date. There is a clear case for two major sections in this move. If this is the case, the 125% level shows a definite expansion but is also a smart place to watch for resistance. This, clustered with the 50% of the ranges card, also suggests that if a pullback is needed to head higher, this could be it.
Chart 3 – NQ- Spotv Monthly Bar Chart
click to enlarge
Chart 4 includes the last two years of price action and the overriding pattern looks like a potential heads and shoulders shape. The underlying tool is the All-Time-Lows resistance card of 787 and the shoulders are at a 75% multiple of that low. Also note the 100% orange lines and how they have been useful in determining previous support and resistance.
Chart 4 – NQ- Spotv Daily Bar Chart
click to enlarge
Zooming into the smaller picture using some ranges cards, time frames and time by degrees, the price is currently at 75% of the run down from September to November, 2012. The time periods of 56-and 58-days are repeating in those runs as well. If we use 13 February as a zero date and run time frames back, we see 145-days to the last major high. For me, that is more than adequate as a comparison to 144-days. I have also included Time by Degrees back and we can see that 90-degrees gives us the 16 November, 2011 low.
Chart 5 – NQ- Spotv Daily Bar Chart
click to enlarge
There are also a number of third dimension tools that add further background but I will leave that to you to investigate. I also suggest that the two-year anniversary of the top of 16 February, 2011 could provide more food for thought.
Following all this analysis you need a conclusion and a plan to make money. I present this as one scenario that the NASDAQ and tech sector may be dragging on the US push forward. This could change overnight and a break to the upside is possible. If that does not materialise, then the bias to short trades may be in order. The actual stocks are for you to select but there are many high-priced stocks with household names that could be ripe for the picking.
Good Trading
Aaron Lynch |