U.S NASDAQ Stock Index

[PCMNewsdesk]

The NASDAQ Composite's previous decline was three waves and the index remains well above prior opening gaps, so the rising trend remains intact. The next short-term resistance surrounds the round-number level of 4300. A close below 4122 would be the initial sign that the rally had exhausted.

[PCMNewsdesk]

While looking through charts this morning it is evident of the narrowness of the rally from February 5. The NASDAQ Composite has closed higher for 10 out of the past 11 days and carried to a new recovery high, yet the percentage of Composite members with new 52-week highs is 5.27%, as shown on the chart. It's a similar picture to the S&P chart above. As previously noted, this profile alone is doesn't guarantee a top but it's consistent with the bearish message in the wide array of measures we've discussed here and in each issue of The Elliott Wave Financial Forecast and The Elliott Wave Theorist. Today's range was relatively narrow and the NASDAQ 100 made a new weekly high but closed the week slightly lower. If the NASDAQ indexes coordinate with the blue chips and close below this week's lows at 4226.70 (Composite) and 3640.63 (100), it would align the major stock indexes in a larger decline over the coming weeks.

[PCMNewsdesk]

We keep cycling through differing measures of upside momentum and the charts look similar. The NASDAQ Composite has carried back to the top of a parallel channel from June 2012 and as it meets the line, the percentage of members with Relative Strength Index's greater than 70 is at 7.7 (Feb. 21). So here too, peak upside momentum occurred in mid-2013 (Jul. 15) and has made a series of lower highs since then. In terms of stocks (as opposed to commodities), momentum leads prices and the 7-month lead of this measure is certainly a respectable length. In terms of psychology, the silliness of late-1999 is in full flourish with respect to many tech-related issues. The latest and best is the stratospheric buyout price of WhatsApp by Facebook. We'll discuss this in more depth in the upcoming issue of EWFF.

[PCMNewsdesk]

Both the NASDAQ Composite and NASDAQ 100 made new intraday extremes, but closed the day lower. The NASDAQ 100 closed below the February 18 close (3679.43), retracing much of the gains of the past week. Peak upside momentum has long passed and even this week's new recovery highs have been against diverging daily momentum. With the Composite again at the top of its channel from June 2012 as momentum has lagged notably, we think the odds are fall on the bearish side.

[PCMNewsdesk]

This morning, the NASDAQ's met the top line of its channel almost exactly. The Composite rallied to 4342.50 as the line crossed 4339.80. This selloff this afternoon drew prices to a small support shelf that runs through 4275. A solid break below this shelf should increase selling pressure and lead to lower prices thereafter. The next near term target would be 4190-4200, with greater bearish potential. The channel's top line crosses 4343.00 on Monday and it should still be stout resistance.

[PCMNewsdesk]

The NASDAQ Composite fell in line with the S&P. Today's decline was 0.72% in the NASDAQ and 0.74% in the S&P. The NASDAQ has a gap from Friday's close at 4308.10 (3696.10 in the 100 index). My guess is that this gap will be filled over the coming day or two. If the NASDAQ joins the Dow and S&P in a decline beneath today's low at 4239.60, it would diminish any remaining bounce potential and instead suggest that another strong wave down had started. The next target would be a prior fourth-wave low at 3968.10 (Feb. 5).

[PCMNewsdesk]

The NASDAQ Composite gapped strongly higher on Tuesday, but today's close at 4336.20 is below Tuesday's close at 4351.90. So there has been no follow-through. Prices are declining after meeting the top line of the channel (see chart), so both the NASDAQ and S&P have "tested" their respective lines simultaneously. The wave structure in the NASDAQ is still murky but a close under Monday's low at 4239.60 would break a support shelf. As we said Wednesday, "if it occurs in five waves and in conjunction with other major indexes, it would indicate the termination of the wave from February 5 and possibly from significantly lower levels."

[PCMNewsdesk]

Similar to the S&P, the NASDAQ Composite turned down after meeting the top line of its channel but here too the decline from the 4371.70 high (Mar. 6) is not clearly impulsive. A five-wave decline that draws the Composite to a close beneath 4239.60 would greatly strengthen the bearish case. This week, the top line of the channel crosses 4362-4372. It remains resistance.

[PCMNewsdesk]

The NASDAQ Composite was able to rally into the close, which turned an intraday decline into a positive close. On the surface, today's turnaround suggests that selling pressure has been exhausted. But it's not clear whether this results in a rally that carries to a new high, above the 4371.70 high (Mar. 6), or if the bounce peters out around 4355. The top line of the NASDAQ's channel crosses near 4372 through the end of this week. It remains resistance.

[PCMNewsdesk]

The NASDAQ Composite's wave structure remains open to differing interpretation, but the fade away in upside momentum is clear. This chart shows two indicators that reflect momentum. The middle graph is the percentage of NASDAQ members with new 52-week highs. The lower graph shows the percentage of members whose Relative Strength Index is above 70. A succession of lower highs from an extreme in July 2013 shows the narrowing in the rally: as each wave pushed to a new recovery high, a contracting percentage of NASDAQ stocks were showing expanding upward strength. The rally remains stretched like a taught rubber band. Prices gapped higher at today's open in conjunction with strength in the blue chip indexes. A coordinated decline (with the Dow, S&P and NASDAQ 100) below a ledge of support surrounding the 4239.20 level would be an initial indication of more selling pressure to come.