As equity markets fret over global economy, lower highs could signal end of run
The Nasdaq is the world’s second-largest stock exchange, behind the New York Stock Exchange (NYSE), with a market capitalisation of more than $10-trillion.
It is basically an alternative exchange to the NYSE and home to several well-known global companies. Among the heavyweight stocks on the Nasdaq 100 are several tech stocks, which is why people often think of it as a tech index.
There are “nontech” stocks on the index, including PepsiCo, Kraft-Heinz and American Airlines, but the vast majority are new-age companies, and many of those are tech stocks.
Facebook, Apple, Amazon, Netflix and Google all appear as heavyweight components on the Nasdaq 100. In other words, the index has mostly growth stocks, and it is not surprising that it has outperformed the S&P 500 by some margin during the bull market of the past nine years. The upward trend on the Nasdaq 100 remains intact. The 200day moving average retains its upward trajectory and has provided support to the index several times this year.
In mid-October the index fell sharply as the equity markets begin to fret over the headwinds the global economy faces. These include rising US interest rates, the end of quantitative easing and the start of quantitative tightening, rising oil prices and the trade war between the US and China.
The 200-day moving average on the Nasdaq 100 index is 7,000. That level corresponds with a lateral area of support that is also at 7,000. It will be imperative for the index to hold above the 200-day moving average if its upward trajectory is to remain intact.
In the near term, it is possible that the index finds support at the area around 7,000 and bounces towards the underside of the 50-day moving average at 7,450. If the index is unable to surpass the September high of 7,700 in the months ahead, then it is possible that a double top formed between August and September at 7,700.
Lower highs in the months ahead could signal caution that the bull market may be over. For now, the technical support zone to monitor is 7,000 while resistance is at 7,450.
The oil price is topical, and not just because of the fleecing South Africans are receiving at the fuel pumps. The break above $80 a barrel of Brent crude was significant from a technical perspective.
Eighty dollars was the high for 2018 that had been tested several times between May and September. In late September the price broke out above $80 and surged above $86. It now appears the price is beginning to consolidate after the recent breakout.
But the break above $80 remains valid and the prior