2022/04/27 (034) Technical Analysis – NDX

After Tuesday’s steep slide,
US stock markets stabilized on Wednesday.
NASDAQ 100 Index has broken down the uptrend channel!


Nasdaq-100 Index has broken down the uptrend channel in the medium term, so an initially weaker increase in value than originally expected is to be expected. The index broke a short-term support level and generated a sell-signal from the short-term trading range. The index is testing support at around 13000 points. This should result in a reaction to the upside, with a downside break at 13000 points giving a sell-signal. The short-term momentum for the index is strongly negative, with the RSI below 30. This suggests increasing investor pessimism and further decline for the Nasdaq-100 Index. However, especially for large stocks, a low RSI can be a sign that the stock is oversold and there is a chance of a reaction to the upside. The RSI curve is sloping down. This can be an early signal of initiating a downtrend. In the medium term, the index is considered slightly positive overall from a technical point of view.

Todays stock market round up

After Tuesday’s steep slide, US stock markets stabilized on Wednesday. The Dow Jones Industrial closed up 0.19 percent at 33,301.93 points after gaining more than one percent at times. The market-wide S&P 500 ultimately gained 0.21 percent to 4183.96 points. The technology-heavy Nasdaq 100 even turned negative late in the day and ended up losing 0.05 percent to 13,003.36 points.

The day before, the Dow had hit its lowest level in six weeks and the Nasdaq 100 even its lowest level in almost a year. The determining factors on the stock exchanges remain the Ukraine war, lockdown measures in China and the need for action due to inflation, which is putting pressure on the US Federal Reserve to tighten monetary policy.

The shares of the Google parent company Alphabet fell by almost four percent after disappointing figures. Experts mainly attributed slower growth overall to YouTube development. According to JPMorgan analyst Douglas Anmuth, the video platform is feeling the effects of competition from TikTok. The operating environment is no longer as favorable for Alphabet as it was last year.

In contrast, there was a price increase of 4.8 percent at Microsoft. The figures published the day before after the market closed were well received here. A strong cloud business helped the software giant generate significantly more revenue in the past quarter. Credit Suisse analyst Philip Winslow commented that the Azure cloud platform once again delivered strong figures.

The mixed results of the latest quarterly reports in the tech sector were supplemented by figures from Texas Instruments and T-Mobile US. The Deutsche Telekom subsidiary’s stocks rose 3.9 percent after raising this year’s target range for new phone contracts. The performance in the first quarter was also praised.

Important basic technical price areas

If the previous lows are not recaptured by bulls, further price losses are imminent.
Above all, aorund the recent interim new lows at 13.724 (01/24/2022), at 13.065 (02/24/2022), and or 13.020 (13/03/2022). Basically, if the NDX trades at least 20% from the last all-time high, we are honest and competent in a bear market. I’m a friend of the old school – not only when it comes to participating in the financial market. That`s why, I will not lose myself in new definitions. So that I will only ever speak of a bear market when the NDX is trading at 13411 points and lower.

However, the 13411 price area is not that important in itself.
Much more because the subject of the bear market itself, in the media, is also addressed by other financial market participants, which then, more or less, sooner or later, leads to an even more volatile market price asctions. And that`s why bulls/bears usually question their medium-term optimism/pessimism in such technical market price action scenarios.
And then, based on that, (not) reposition theirself long/short.

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.