Thursday's Market Minute: /NQ Takes A Breather As Technicals Darken

The Nasdaq 100 futures contract looks to be taking at least a brief pause in a multi-week breakneck rally. The /NQ soared as high as 12% since the Oct. 12 close before deflating somewhat to a still-formidable 9.5% gain as of yesterday’s close, notching only five red days in the past 21. Bulls finally gave up a bit of ground during the past two days, particularly during yesterday’s 1.3% drop on the biggest volume since Oct. 6. In terms of momentum, the MACD shows bullish action has ground to a halt and on the verge of a bearish crossover. Meanwhile, the RSI fell and closed below the overbought area, another sign typically viewed as bearish.

Other indicators that made noteworthy recent moves were a bearish crossover from the Parabolic SAR and the Average Directional Index (ADX) falling from a peak, which can reflect a potential trend shift. The area between 15700-15800 will be critical for bulls to hold. This relatively small area encompasses the 21-day Exponential Moving Average, as well as yearly Linear Regression Line (used to determine fair value) and the old highs from August. If prices continue to fall, the confluence of the 50-day Simple Moving Average and the 63-day EMA around 15340-15370 is another point to watch. If the rally continues, resistance could be in store near the yearly +1 Standard Deviation Channel near 16860.

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