Last week we projected that NDX would hit lower targets depicted on the chart below. Indicators, breadth and price action warranted short positions in the index, when the trend from September lows broke. We felt the next day might trigger a sell signal.
The strategy remains, that until price moves back above the 9/20ema on short time frames, we can only assume bullish moves are counter trend and subject to failure at the declining 9/20ema. Additionally, NAMO is retreating to levels not seen since the February lows, so there is potential to meet those levels again. NASI is accelerating lower as well, as institutions wait for a bottom to form over the coming weeks.
Here is the NDX chart as of Thursday market on close. (MOC). Target two will likely be touched sooner rather than later. We added another target which aligns with pivot highs set in June and the 200ma. Target three is less likely to occur in the short term as price action is oversold on many indicators. A bounce is imminent.
Finally, it is easy to get caught up in the moment and forget NDX is only 100 stocks. While it is the largest and most profitable tech companies that comprise 51% of the index, its still only 107 stocks.
It’s also important to note that all 9 SPDR sectors are on a sell signal. A firm and sustained bounce is needed to transform these sectors to buy signals. Therefore, any rebounds must be assumed to be short lived and subject to failure, unless it is persistent.
The NYSE Composite
NYA represents a broader measure of market performance with its 2000 stocks. We see price below the 200ma. Unless this changes and the trend reverses, we can expect more downside for NDX, SPX, IWM and NYA.
We are 100% cash in our 401(k), IRA and Coverdell accounts. Since I do not know your specific needs or circumstances it is important that you do your own research and consult an investment advisor when taking any trades herein. My quest is to alert you to my thoughts and actions.
Any trades we take in out trading account are smaller as a condition of proximity to the election. Swings are very short term (1-2 days) and Index options are scalps, unless stated otherwise.
Good luck today – Vinny
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