Technical Review (6 October’20)

Nasdaq Composite has been the driving force behind the bull market that started on March 20, 2020. It has outperformed S&P500, Dow Jones and Russell by a big margin. However, since the start of the market correction in early September, Nasdaq has been the weakest of the four indices. In this post, I will analyze the recent NQ price action, go through some of the key technical observations and outline a bearish and a bullish case for Nasdaq.

S&P500: What’s Next?

The Twitter poll I ran yesterday indicates that the market participants’ views on the S&P500’s next move are split with a slight skew towards a more bullish outlook. If bulls are correct, the S&P500 will finally break out above the long-term diagonal resistance line and reach $4000. However, if bears are correct, we will most likely enter into a new bear market with a potential retest of the March lows.

First Line of Support

I developed a simple concept of the ‘First Line of Support’ to help me time market reversals. The concept is very simple but powerful. By tracking futures price action, I identify important levels of demand (support) on the ES and NQ charts. If the indices breach those levels, I usually exit any long positions I might hold at a time and go short the market.