As the Bulls and the Bears slug it out on the trading floor and social media, blogs, etc., it pays to check the actual price chart of the NASDAQ 100 (NDX). See the chart below. Here I plotted about six months’ worth of daily candles with several important technical indicators (TIs):
- A Relative Strength Indicator: The RSI5
- Two simple moving averages: 50-day (blue) and 200-day (red)
- The Ichimoku cloud: see here, aka "The Cloud."
- The Moving Average Convergence/Divergence: MACD
- Money Flow Indicator: MFI14
Albeit there are many more TIs, these five are my bread-n-butter indicators to help assess the index’s most likely trend. Let’s work our way down.
- The RSI5 is currently at >71, and on Friday last week, it reached a higher reading than at any time since the correction started from the Nov. 22 all-time high (ATH). Thus, it signals a change in trend. Bulls 1, Bears 0.
- The index is below its 50d and 200d SMA. It will have to close above these two SMAs to re-establish a new uptrend. Compare now with October-December 2020, for example. Bulls 0, Bears 1.
- The index is below “The Cloud.” It must close back above it (NDX15200 to signal a new uptrend). Compare now with October-December 2020, for example. Bulls 0, Bears 1
- The MACD is on a buy and is now at higher levels than during the correction period, suggesting a new phase has started (just a bounce or new uptrend?!): Bulls 1, Bears 0.
- Money is flowing back into stocks, and the indicator made a higher low in mid-March compared to late January. But, it will have to break above the mid-February levels to signal a change in trend. Bulls 1, Bears 1.
Bottom line: the chart is currently neutral
The overall cumulative verdict based on these TIs is Bulls 3 vs. Bears 3. Thus, although there are many other positive developments, such as in market breadth (see my Tweet here), the current price chart for the NDX is neutral based on these simple but effective TIs.
A breakout above the SMAs and "The Cloud" is needed to give the Bulls the edge. While the Bulls and the Bears will continue to slug it out on the trading floor, social media, blogs, and comments sections, ultimately the chart will tell us who the winner will be.