Nasdaq 100 pushes to new one-month high. Where next?

The tech-focused Nasdaq 100 continues its surge off the March lows, but can it sustain these gains?

From a weekly chart perspective, the outlook is quite promising. The price has surged from its lows, rebounding from the 200-week simple moving average (SMA) at 6550. In the short term, a reversal back below the 50-week SMA (8012) would be a bearish development, but for now there seems to be additional upside from here.

In addition, we are likely to have a bullish stochastic crossover on the weekly chart, and from a low level, similar to what we saw in 2018. A moving average convergence divergence (MACD) crossover may follow in due course, helping to cement the bullish view.

Looking at the Nasdaq Advance-Decline line, this has continued to rise, moving back above its 13-day exponential moving average, with MACD continuing to rise as well. Until these two things reverse the buyers remain in control. Bears will want to see these two things reverse to indicate that a lower high has been created in the index itself.

The weekly version of the chart has recovered to some extent as well, although a positive MACD crossover has yet to take place. This however marked the strong signs of recovery back in early 2016 and late 2018, so is something that will reinforce the bullish view.

The overall put/call ratio (10-direct market access [DMA] shown below) has bounced slightly, a negative development – further rises tend to see indices and stocks fall, so this should be watched in the near term.

The impressive rebound off the lows has seen short-term breadth shoot to its highest level since mid-2019. But with 97% of the index above its 20-day SMA, short-term upside may be limited. 2018, as might be expected, is the exception. Markets were heavily oversold then, and continued to rally even as the percentage of stocks above their 20-day SMA fell. Usually however, some near-term weakness is to be expected.

From a longer-term perspective, the underlying indicators are relatively bullish, although it is far too soon to say that a long-term low is in place. But for now it looks like the buyers remain in charge.

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