Making New All-Time Highs

As anticipated in my previous article titled “8/3/2016 – Brexit Fears Alleviated, Now What?”, the NASDAQ has been making new all-time highs over the previous couple of weeks but has been showing weakness as of the last couple days.

I had a question from a TSC member via email as to whether or not I thought the NASDAQ was still poised for the 5,850 level as I’ve previously talked about. Let’s look at some updated charts for the index and check in on its progress to see if we can expect it to continue making new all-time highs in the upcoming months.

Pieces Are Falling Into Place

This first chart is a 5 year monthly chart to check on the MACD Histogram and ensure that it is still trending in the preferred direction. It is. That means there is still a “buy the dip” mentality.

Rate Hikes By The Federal Reserve Are Going To Kill This Rally

In that August 3rd article linked above, I talked about how I thought there was going to be a September rate hike because that was needed as part of the corrective pattern I was predicting. The probability of a September rate hike at the beginning of this month was like 20%. Janet Yellen stated last week that September is in play. I really didn’t want to be right on this call but it does seem as if the pieces are falling into place for the Elliott Wave Pattern I illustrated above.

Here is how I see this playing out. After the current weakness is over, we rally into September. The September rate hike causes the next pullback. Everyone continues the buy the dip mentality and thinks the Fed will be done raising rates. We rally into either November or December, when the either rate hike slaps the market in the face and catches everyone in the “one and done” camp off guard.

Watch For Support at the 50 Day Moving Average

The moving averages can be used on the indices charts as well as individual charts. This is a 9 month daily candlestick pattern; it illustrates that the index just broke through the 5, 10 and 20 Day Moving Averages.

Analyzing the NASDAQ Composite Using Moving Averages

Look for the index to find support around the 5,100 level during any continued pullback. That should also intersect with the 50 Day moving average line. If the 5,100 support level fails, there are also Rising Window Candlestick Pattern support areas (gap-ups) at the 5,000 and the 4,900 levels. Monitoring the chart is necessary to determine the exact pullback area.

Summary

While this next dip is still ok to buy, the risks are increasing. But from an Elliott Wave perspective, the index still has at least one more uptrend which will help the NASDAQ Composite to continue making new all-time highs. Being in the right stocks during this last leg up will be important, as usual.

The bounce that happens somewhere in the 4,900 – 5,100 range should propel the NASDAQ toward new highs – whether or not 5,850 is hit or not is something to be monitored. Remember that while all tools provide very specific targets, these are guides only and should not be considered exact, hard targets.

Leave requests for individual stocks in the Idea Chamber. Stay attentive. Ask questions. Good luck trading.