Our go to leading market index indicator of late, the NASDAQ 100 (NDX), which is tracked by
the widely held exchange traded fund (ETF) Invesco
QQQ Trust (QQQ), may have found some support on Wednesday in the big sell off
near 13000. Actually, using our wide chisel-tip Sharpie we would draw this
current near term support between the black line support levels in the
13000-13200 range on the accompanying chart.
While we still do not expect any major decline here, we do
not foresee any major upside either over the next six months – the Worst Six
Month of the year May-October. We zoomed in and updated a few lines and
notations on the charts we presented in our May Outlook
and in our NDX
Uptrend Broken, Support Under Pressure blog post earlier this week.
We are rather comfortable with our timely April 22 Best Six
Months Seasonal MACD Sell Signal and with our outlook for a more typical
“Reposition in May” period. The Fed can print money faster than the market can
decline and more fiscal stimulus is coming down the pike as well as continued
fuel from pent-up pandemic demand.
Look for NASDAQ and NDX to rebound and lead the rally into
early July through the rest of its Best Eight Months November-June and the
historically strong first half of July in keeping with seasonal market
patterns. Though, we do see resistance at the recent April highs near NDX
If we do break below this 13000 support level there is
support at the uptrend line since the September/October lows around 12900 and
12750, which would be an 8-9% pullback from the April 16 14041.91 closing Doji
candle high. Below that are the March lows 12200-12420 which would be an 11-13%
In our view all the stimulus, pent-up demand and Fed
money will prevent any major down draft, while seasonals, valuations,
technicals, internals, sector rotation and sentiment will keep a lid on the
upside most likely until the fall. Please enjoy a more normal summer.