What are the technicals looking like?
The Nasdaq composite index saw good gains yesterday and got off to a strong start today, but has moved back lower and although, still up on the day has given back most of the gains. Also of interest is the index stalled at 4899.13. It get's your attention when something stalls at a handle change over level. It is not necessarily the end all be all, but....
Anyway, what does the chart say for the Nasdaq index irrespective of the 4900 level?
The chart above is the daily chart and of note is that the move higher yesterday took the price closer to the 200 day MA at the 4863 area. The price has been below the 200 day MA since gapping below that moving average line AND the 100 day MA line back on January 4th (it stayed below on January 5th and trended lower). Today, the index gapped above the 200 day MA at the 4863.01. That was a bullish move.
The problem is the price could not get above a topside trend line. The high stalled ahead of the trend line and we are seeing a corrective move lower. The low has dipped back below that 200 day MA - moving to a low of 4861.87, but is trading back above. The high from yesterday was 4849.30. That gap remains.
So there is a lot going on in this index.
- Gap on daily (down to 4849.30). Will it be filled?
- Gap above 200 day MA (currently testing that MA at 4863.01)
- Held below topside trend line. If the index is to push even higher, it needs to get and stay above this trend line.
Needless to say, from a technical perspective the index is at a crossroad. Another move below the 4863 would likely go and fill that gap and then the market will have other decisions (like is the rally over?)
What about the S&P index?
The daily chart below shows that the move higher today moved the index above the topside trend line connecting highs from 2015 4Q highs. Unlike the Nasdaq composite, the S&P index has been above the 200 day MA over the last 10 trading days. The low on Friday got close to testing the MA line and bounced nicely off that support line.
SO overall, the bias is more bullish and the move above the trend line today increases the bullishness.
The question now is can the broken trend line hold today?
That trend line comes in at 2055.43. The low today has bottomed at 4058.27. A move below the line would weaken the gap higher today, and could see some of the Yellen euphoria fade.
Overall, the support levels in both the Nasdaq and the S&P are holding (S&P is trading 2063.52 and the Nasdaq is trading 4866.50), but eyes will be on the rest of the day and the close. Be aware.