Stock Markets Analysis and Opinion

Nasdaq Bullish Signals Dwindle – Breadth Breakdown May Signal Start of Pullback

2024.11.05 04:31

The had looked primed for a breakout but there was a trend breakdown last week. The index has returned to its base with a break in its 20-day MA; the 50-day MA is its next port of call.

Technicals are mixed; On-Balance-Volume is still moving strongly in bulls favor, and I thought this would be the driver for the breakout. 

Momentum is solid and short term is at a pullback ‘buy’. However, it’s the trend break on the back of a (weak) MACD ‘sell’ trigger that is of greater concern.

Nasdaq Composite-Daily Chart

But its Nasdaq breadth metrics that are pointing to bigger troubles ahead. The Percentage of Nasdaq Stocks Above the 50-day MA have breached trend support and dropped below the mid-50% point. Supporting technicals are net bearish, but not oversold.

NAA50R-Daily Chart

It was a similar story for the Nasdaq Bullish Percents (percentage of stocks on point-n-figure ‘buy’ signals); a trend break, although no drop below the 50% line.BPCOMPQ-Daily Chart

The early warning sign was the Nasdaq Summation Index. It took an accelerated move lower with an expansion in technical net weakness. A swing low will be confirmed when the 3-day EMA crosses above the 5-day EMA.NASI-Daily Chart

Finally, the is flirting with a major breakdown. Not just its 200-day MA but also the bearish wedge. Technicals are net bearish, but not oversold. This index is looking very vulnerable to further losses.SOX-Daily Chart

And if it breaks, there is a clear target to aim for; the rising trendline from 2022.

SOX-Weekly Chart

For the remainder of the week, keep an eye on the Nasdaq. This index is the canary in the coalmine for broader losses across indices. Election day is a natural catalyst for a reaction, independent of who wins the presidency. Sell the news.



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