NASDAQ Outlook

November 26, 2021No Comments

Hello, and welcome to the Smart Money, Dumb Money show. I’m your host, Keith Richards. And today we’re going to talk about the NASDAQ and the reason I want to talk about the NASDAQ  because I just finished today, which is the I’m recording this on November the 24th of 2021. And I just wrote a blog on the COVID cycles and how one might trade the various sectors based on COVID patterns of the virus, increases in virus shrinkages if that’s what you want to call them. So, I want you to read that blog if you do nothing else. If you regularly watch these videos but don’t read the blog, I strongly encourage you to read my most recent blog on Trading the COVID Cycles. The reason for that is because it’s a very tradable cycle that I talk about, and I did a fair amount of research.

I really think you’ll get something out of it. Today we’re going to talk a little bit about the NASDAQ, which is one of the elements of the COVID cycle that I talk about in the video. Now, one of the things I didn’t get into details on the blog was the way the NASDAQ is possibly setting up for a little bit more correction before the potential upside for the NASDAQ continues based on the COVID cycle that I talked about in the blog. I want to talk a little about the NASDAQ’s technicals today and why I think it may correct or possibly has room for correction in the near term before I anticipate a probable upside for that index. So, let’s get right down to it. And I’m going to share my screen and bring you right over to the NASDAQ chart. Now, this is a daily chart, so it’s a very close look at the NASDAQ.

And what I want you to notice is that, again, the daily chart is a short-term view. The trend over the long run has been bullish, but I am seeing right now a very short-term pattern that may be indicating or leading into what could be a very short-term double top. Now, sometimes you get these patterns. Here is a potential double top, and it never materialized. So, you just want to be aware this could have been a double top on a larger timescale. It didn’t materialize. I am not necessarily predicting that there will be a further pull back on the NASDAQ, but because I am noting on my blog, that the NASDAQ is one of the sectors you want to be in when you identify a COVID cycle uptick, you want to be sure that the NASDAQ chart itself is in fact positive when you go into it.

So right now, I’m seeing a potential for a double top, but what is actually worrying me more is the divergences on the daily chart, not so much on the weekly charts, but on the daily chart on Stochastics, which is a very, very short term, very quick moving momentum indicator. So, you have to be aware of that, that the Stochastics can change its mind, you know, pretty frequently. But you’re also seeing on the more midterm looking, indicator RSI, a diversion. So here you had a higher high, slightly higher high on the NASDAQ and a lower high on both of these indicators. You’re also getting some negative divergence on MACD, which is generally considered a longer indicator. So just, you know, something to take a look at, I want to actually bring us to the weekly chart and I’m going to bring us right back to that same collection.

So, this is a weekly chart. You really can’t see the double top pattern in there that I was just looking at, but you are seeing some negative crossover on the Stochastics, a little bit of a negative pull back from an overbought level on RSI. And there is that negative pattern on MACD which has been going on really since the beginning of 2021. Now that obviously has not hurt the trend on the NASDAQ. It’s still moving up and it’s still above its 40-week, 200 days moving average. So, I bring you back to that daily chart that we just looked at again, not so much because I am concerned about the likelihood of a correction, but there is a potential based on some of these divergences that we’re seeing and a very, very near term possible double top that we’re seeing on the daily chart.

Would you treat bearishly on the NASDAQ right now, based on what we are looking at? Absolutely not. The trend is still up, it’s above its 200-day moving average. There’s no reason to buy, you know, inverse NASDAQ EFTs, or anything of that nature. You don’t need to really hedge your NASDAQ positions yet but keep an eye on it. Because sometimes when we see these topping and rollover patterns on momentum indicators, especially on the weekly chart, like we’re seeing here and a longer-term divergence, it can lead us into trouble. It’s not an absolute, but it’s something I want to keep your eyes on the ball on. So that’s about today’s message. It’s really just, be sure you read that blog on COVID trading trends. I think it’s a very important blog. I write the occasional blog that I think is a little bit more noteworthy than others.

About a year ago, I wrote a very extensive write-up on why you should move into commodities. I was way ahead of the curve on that. And those of you who read the blog back then has made a lot of money on commodities. I think this is one of those blogs. I do think that the conversation I had on my blog regarding COVID trading trends is a very, very viable trading idea. And it’s some, evidence on how you can predict these patterns within COVID, which in turn allows you to trade the cycles. And the sectors that revolve around these COVID patterns are quite viable and quite tradable. So, I hope that this little talk about NASDAQ today maybe gives you some ideas on what to watch for on NASDAQ, just to assure that it’s not actually breaking down and I again, hopefully, I have influenced you to read this week’s blog on COVID cycles. Thanks very much for watching and we’ll catch you again next week.


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