2022/04/28 (035) Technical Analysis – NDX

After another rollercoaster ride,
the NASDAQ 100 gained significantly on Thursday…
But our short NDX trading capability is still in the money!


After another rollercoaster ride, the US stock markets partially recovered from the recent series of losses and gained significantly on Thursday. The stock markets rose more strongly than in seven weeks after good quarterly figures from some tech heavyweights fueled optimism that corporate profits could withstand restrictive US monetary policy. Investors also saw signs of solid consumer demand despite a surprise slowdown in economic growth in the fourth quarter. The Dow Jones Industrial, which was initially firmer, briefly turned negative in early trading, but recovered significantly and closed up 1.85 percent at 33,916.39 points. The market-wide S&P 500 gained 2.47 percent to 4287.50 points. The tech-heavy Nasdaq 100, which fell to its lowest level in more than a year the day before, rose 3.48 percent to 13,456.06 points on Thursday.

The Nasdaq-100 Index was recently further sold

The index fell below 13,240 points and worked through the target range between 13,065 and 13,002 points. Yesterday, the index briefly dipped below 13,000 points, but closed just above that mark. The positive opening, primarily due to the heavyweight Meta, is countered again today by the bear side. 13,240 points act as resistance. Only above that could the index complete a further recovery towards 13,536 points. On the downside, the important support zone between 13,065 and 13,002 points remains. A closing price below could cause price losses in the direction of 12,760 and 12,628 points. For a further look we should consider a possible upcoming gap risk tonight. Because then the heavyweights Amazon, Apple and Intel present figures.

Amazon: Shares of the e-commerce giant tumbled by 10% after hours, after the company reported first-quarter results and issued weaker-than-expected revenue guidance for the second quarter. Amazon recorded a $7.6 billion loss on its Rivian investment after the EV maker’s shares lost more than half their value in the quarter.

Apple: Apple shares initially got a lift after a big earnings beat but turned lower after CFO Luca Maestri said on the earnings call that supply chain constraints could hinder fiscal third-quarter revenue by between $4 billion and $8 billion. Shares were down more than 4% after hours.

Intel: Tech firm Intel’s shares fell more than 4% after the company issued weak guidance for its fiscal second quarter. Intel called for adjusted second quarter-earnings per share of 70 cents, compared to the 83 cents per share expected by analysts polled by Refinitiv.

By the way Robinhood reprted last hours also their figures: The investing app’s shares dropped more than 8% after reporting a wider-than-expected loss and shrinking revenue for the first quarter. The company also reported a decrease in monthly active users, to 15.9 million from 17.7 million a year ago.

This trading capability has been open since our 4th edition, at 14,500 points (02/16/2022)

And don’t get me wrong: consider the 3 other long (APPL, FB, MSFT) and one other short (TSLA) trading capability, in this context. Because at the NDX, the litter separates from the wheat, as we say colloquially here in Germany (in my home country). For better or for worse, companies that have been guaranteeing profits for decades are given a higher fundamental valuation, in the truest sense of the word, in the current financial market scenario (with an expensive yield curve). As companies that have not (yet) made profits for decades. Let alone you pay out to their shareholders. Since the yield curve is becoming more expensive at the same time. And thus again an asset alternative for many financial market participants.

From this point of view i am basically short in the NDX – incl. long trading capabilities in some profit machines (like APPL, FB, MSFT), which have already proven over the past decades that they don’t have to hide from an expensive yield curve. On the contrary How ever, if the animal instincts, let alone childish emotions, overwhelm us self-determined financial market participants due to the volatile rising/falling daily price actionst, then no reasonable rational analysis and insight, like the one just tried, will help. Are companies that have guaranteed profits for decades given a higher fundamental valuation, in the truest sense of the word. As companies that have not (yet) made profits for decades. Let alone you pay out to your shareholders. Since the yield curve is becoming more expensive at the same time. And thus again an asset alternative for many financial market participants.

Runaway down gap confirms my fears

For the further course of the NDX, at least in my opinion, the 3 days (from April 6th, 2020, April 7th, 2022 & April 8th, 2020) are groundbreaking. Since after that, if you will, two attempts at bullish recovery failed in retrospect. And thus confirming the overriding medium-term bearish technical chart. So the question arises: 20% correction? Or more?

If NDX is trading at 13411 points and lower, the technology index is per definition in a bear market!
So that long-term oriented investors, and not only medium-term traders, let alone short-term speculators, are allowed to perceive the situation of the NDX anew, analyze it, even evaluate it!?

14.639 (high from 04/06/2022) & 14.307 (low from 04/08/2022) was the trading range from the 3 down runaway gaps.
So I will only give the NDX a yellow light again when we are trading prices above 14,250 points again. I therefore continue to perceive a lower NDX of 14,250 as Further lower prices up to 12,000 points are still possible. However, nobody has died from taking profits, so that profits can already be realized by 13,000 points. Because I formulated the bearish trading capability in conjunction with the other three long trading capabilities to mitigate our upcoming losses in these 3 positions. Since I’m basically still bullish, at least as far as these 3 stocks are concerned. Should you manifest a trend reversal formation on the chart this spring or summer respectively. And the FED shouldn’t raise interest rates as quickly and sharply as we NDX bulls fear. Therefore, only a green bullish traffic light again, for the entire NDX, should the GAP be closed again – and we are trading prices of 14,750 points and higher again.