Nasdaq NQ - A Fundamental and Technical Warning Signal
Updated
Frankly speaking, the pattern that would make the most sense for the markets with the situation in the world at present is that the ATH on Nasdaq, Dow, and SPX are taken before the end of '23.
However, there are a number of problems that indicate despite the extreme greed, bear capitulation, and bull euphoria this may not happen.
One of the biggest fundamental factors is comments made by Jerome Powell at the last FOMC press conference, where for the first time in 15 months, a pause on rate hikes was induced.
The small one is Powell made sure everybody understood that the pause was for June and June alone and not to be misconstrued as a policy change.
The big one is that Powell plainly stated in answers to reporters that rates will not be cut until inflation comes down significantly, and that he expects this to take years.
What this really means is that in order to have inflation really come back down, you need '08 GFC/'20 COVID demand destruction to unfold, but arguably on a bigger and more dramatic scale.
What can cause a bigger and more dramatic worldwide calamity? There are only a few things, and none of them are pretty.
Will they happen before election year? During election year?
On top of this, with the Treasury General Account refill being the catalyst that finally impacts the reverse repo facility, liquidity is coming out of the markets, not going in.
So the fundamentals of the markets and economy are actually worse now at 15,500 in many ways than they were at 10,000.
But fundamentals never matter in the linear way people expect, and that's why you get 50% rallies on tech when tech as a sector is primarily worthless.
So here's the technical breakdown of the NQ.
On weekly and monthly bars, Nasdaq has gone up in a straight line since '23 opened. The low of the year was set in the first week of January.
This is generally bullish and means we can expect new highs.
However, all of these fundamental turns in the feng shui of the economic mood have occurred right as the Nasdaq was pushed back to the distribution block that formed the '21 top.
This area also happens to be the 79% Fibonacci retracement level, and the entire bull run has been composed of a parabolic trend angle of better than 70 percent.
Price now trades far away from every trendline there is.
In fact, the delta between the '22 LOY and the trendline composed of the '18 volmageddon and '20 COVID lows is a staggering 13 percent.
From where we are now it's 6,000 points.
It's too parabolic, and it's happening inside of a fundamental tightening cycle, when China's economy and society is in huge trouble, and also a time when oil and natural gas look as if they're about to go town.
This area between where we are now and the '22 top is an area of huge resistance.
The intention, or "the plan," if you will, may very well be to send it back to the trendline with new highs being incurred only on the back of a Donald Trump 2024 Presidency.
Trump winning '24 won't be quite the "W" for rightists and conservatives and the religious that they think it will be.
In fact, Trump is an ass and may usher in an era of globalism, so make sure you vote for Ron DeSantis or RFK.
If you ask me, the biggest fundamental tell in this is the USD.
The tells are subtle, but February was a gap rebalance, and April was a higher low that also formed a double bottom.
All on its own, I generally feel that's bearish.
But May formed a higher low, and all while equities were mooning.
And on top of that, the DXY stopped during the height of the '22 collapse, at under the 115 psychological level.
Nasdaq never swept the 9,xxx level.
Moreover, VIX and VIX futures are printing 13 and 14 handles, figures usually reserved for the most bullish of economic conditions.
Not economic conditions where the indexes are still trading at lower highs and almost all of the core equities are still trading at just a blip.
Bears have been calling for a crash for months. But how many are not only about to miss the opportunity after getting hurt, but start actually buying the dip?
If Nasdaq can't make a new high and run away by July, then 9,500 is coming and it's going to come fast.
You better believe it.
However, there are a number of problems that indicate despite the extreme greed, bear capitulation, and bull euphoria this may not happen.
One of the biggest fundamental factors is comments made by Jerome Powell at the last FOMC press conference, where for the first time in 15 months, a pause on rate hikes was induced.
The small one is Powell made sure everybody understood that the pause was for June and June alone and not to be misconstrued as a policy change.
The big one is that Powell plainly stated in answers to reporters that rates will not be cut until inflation comes down significantly, and that he expects this to take years.
What this really means is that in order to have inflation really come back down, you need '08 GFC/'20 COVID demand destruction to unfold, but arguably on a bigger and more dramatic scale.
What can cause a bigger and more dramatic worldwide calamity? There are only a few things, and none of them are pretty.
Will they happen before election year? During election year?
On top of this, with the Treasury General Account refill being the catalyst that finally impacts the reverse repo facility, liquidity is coming out of the markets, not going in.
So the fundamentals of the markets and economy are actually worse now at 15,500 in many ways than they were at 10,000.
But fundamentals never matter in the linear way people expect, and that's why you get 50% rallies on tech when tech as a sector is primarily worthless.
So here's the technical breakdown of the NQ.
On weekly and monthly bars, Nasdaq has gone up in a straight line since '23 opened. The low of the year was set in the first week of January.
This is generally bullish and means we can expect new highs.
However, all of these fundamental turns in the feng shui of the economic mood have occurred right as the Nasdaq was pushed back to the distribution block that formed the '21 top.
This area also happens to be the 79% Fibonacci retracement level, and the entire bull run has been composed of a parabolic trend angle of better than 70 percent.
Price now trades far away from every trendline there is.
In fact, the delta between the '22 LOY and the trendline composed of the '18 volmageddon and '20 COVID lows is a staggering 13 percent.
From where we are now it's 6,000 points.
It's too parabolic, and it's happening inside of a fundamental tightening cycle, when China's economy and society is in huge trouble, and also a time when oil and natural gas look as if they're about to go town.
This area between where we are now and the '22 top is an area of huge resistance.
The intention, or "the plan," if you will, may very well be to send it back to the trendline with new highs being incurred only on the back of a Donald Trump 2024 Presidency.
Trump winning '24 won't be quite the "W" for rightists and conservatives and the religious that they think it will be.
In fact, Trump is an ass and may usher in an era of globalism, so make sure you vote for Ron DeSantis or RFK.
If you ask me, the biggest fundamental tell in this is the USD.
The tells are subtle, but February was a gap rebalance, and April was a higher low that also formed a double bottom.
All on its own, I generally feel that's bearish.
But May formed a higher low, and all while equities were mooning.
And on top of that, the DXY stopped during the height of the '22 collapse, at under the 115 psychological level.
Nasdaq never swept the 9,xxx level.
Moreover, VIX and VIX futures are printing 13 and 14 handles, figures usually reserved for the most bullish of economic conditions.
Not economic conditions where the indexes are still trading at lower highs and almost all of the core equities are still trading at just a blip.
Bears have been calling for a crash for months. But how many are not only about to miss the opportunity after getting hurt, but start actually buying the dip?
If Nasdaq can't make a new high and run away by July, then 9,500 is coming and it's going to come fast.
You better believe it.
Note
The TradingView widget when I post this draws the trend angle measurer through the bars, which is not how it is on the actual chart lol.Something I really want to say to everyone is this:
If you're LT bullish on the economy and the US equities market, you DO NOT want to see a new all time high.
You WANT to see a retrace back to the calamity trend line.
Only then will the world economy be able to continue in a healthy way for years to come.
If we get a bump and run it's really the end of the end.
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