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“Are you bullish or bearish on the Nasdaq 100?”

I usually get requested this, or an analogous query for the S&P 500, gold, bonds, particular person shares, Bitcoin, and just about the rest you may picture that has a worth. My follow-up query is all the time, “Effectively, what’s your timeframe?”

It is tempting to research a chart, measure the traits, break down all types of technical indicators, after which boil it down to at least one single name: bullish or bearish. However conscious traders know that the market strikes on a number of timeframes, with short-term ripples turning into medium-term waves, that are a part of the long-term tides. 

Given this week’s sudden rally, reversing final week’s dismal deterioration, I assumed it’s useful to focus in on the Nasdaq 100 and determine the traits on three completely different timeframes. I believe you may discover that whereas the tactical timeframe ended this week in a bullish section, the medium-term timeframe could present higher clues about what’s subsequent for shares.

Quick-Time period: Rally Mode however Testing Resistance

You’ll be able to’t deny the energy of the uptrend this week, which supplied a stark distinction to final week’s dredging. Final week, we noticed a transparent distribution, as three of the 5 buying and selling days ended close to that day’s low. This week, as an alternative, most day’s periods closed close to the highest of the day by day vary.

The final three months have developed a transparent sample of decrease highs and decrease lows on the chart. Discover how the present upswing seems very comparable in worth change and time period to earlier rallies in early October and late August? Now look all the way down to the RSI, and you will see that the RSI is true round 60, just about the place the indicator topped out in these earlier two countertrend upswings. So whereas this latest rally has been sudden, extreme, and seductive, it truly tracks fairly nicely with different bear market rallies we have skilled.

Thus, whereas I am drawn in by the depth of this latest rally, I would not be shocked to see a minimum of a quick pullback from this clear resistance stage.

Medium-Time period: Downtrend Nonetheless in Place

Whenever you take a step again to a two-year day by day chart, you may see how the downtrend channel suits into the general traits of 2022-2023. On the medium-term time-frame, I’ve thought-about this market as responsible till confirmed harmless. As soon as this constant sample of decrease highs and decrease lows seems, I believe it’s important to assume that the downtrend will persist till confirmed in any other case.

So what would we have to see to show extra bullish on the medium-term time-frame? First, I might look ahead to a breakout via the higher boundary of this development channel. Friday’s transfer greater made me assume we’d see a breakout earlier than the weekend, however now I might say that is crucial line to observe within the week to return. A breakout would recommend that new patrons are coming into the market, or a minimum of that the pessimism that has pervaded this market into the fourth quarter is beginning to dissipate.

One other indication to observe for can be the RSI pushing above the important thing 60 stage. Latest countertrend rallies noticed the RSI high out round 60, so a worth breakout accompanied by an RSI pushing above 60 may validate a extra constructive medium-term thesis.

Lengthy-Time period: Bullish Thesis Stays Intact

Why is the long-term image nonetheless bullish in my view? As a result of the downtrend beginning in July did not break under the primary Fibonacci assist stage round 338. As a result of the Nasdaq 100 remained above its 200-day transferring common. As a result of while you zoom out to the weekly chart, the latest correction appears pretty minor by historic requirements.

The weekly QQQ chart illustrates how the actual painful corrections begin with a break under the 40-week transferring common, however then normally hold going. For this reason so many traders observe the 40-week or 200-day transferring common, as a result of so long as the market stays above this key long-term barometer, any pullback is simply not extreme sufficient to interrupt the bigger development.

The weekly RSI is again above 50, and we’re not too far under all-time highs for this main progress index. So whereas the medium-term development remains to be bearish by my learn, the long-term charts present how we should always nonetheless take into account 2023 as half of a bigger bull market construction.

Which period body is most vital to you? What’s your common funding horizon? Nevertheless you’ll reply these questions, always remember the worth of going one time-frame bigger, and one time-frame smaller. Solely by contemplating the traits in different time frames can we higher perceive our foremost investing time-frame.

RR#6,

Dave

P.S. Able to improve your funding course of? Take a look at my free behavioral investing course!

David Keller, CMT

Chief Market Strategist

StockCharts.com

Disclaimer: This weblog is for academic functions solely and shouldn’t be construed as monetary recommendation. The concepts and techniques ought to by no means be used with out first assessing your personal private and monetary scenario, or with out consulting a monetary skilled.

The creator doesn’t have a place in talked about securities on the time of publication. Any opinions expressed herein are solely these of the creator and don’t in any manner symbolize the views or opinions of some other particular person or entity.