Double top forming on the Nasdaq?

Author: Giles Coghlan | Category: News

Market chatter jittery over recent gains

The Nasdaq has been on a decent run recently but it could be in the process of forming a double top. Take a look at the chart below for the pattern forming and the trigger sellers will use for an entry. I flagged the potential for a top to form in the Nasdaq at the start of the week and you can read that here. The heart of the rationale for a possible top was based on this : 

The rationale is based around the ratio between the NASDAQ 100 and the Russel 2000.The ratio between the two indexes is currently at its highest since the last tech bubble around the turn of the millennium in 2000. It is, at the time of writing, approaching a three standard deviation move from its mean quarterly average since 1985.
What could sink the Nasdaq and bring the double top into play?

One area to watch is the closure of consulates. This represents a step up in the China/US tensions. After the Houston consulate was shut on Wednesday of this week President Trump said that shutting more embassies cannot be ruled out. A further escalation and we are back to the US/China trade war playbook from 2019. 

With a very large number of market participants who are very jittery with the rise in stock prices the mood is there for selling. If we do see that bearish sentiment take hold from geo-political concerns or slowing economies  this double top offers a way of playing the sell side. 
Double top in Nasdaq
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