Nasdaq 100 Technical: Impending corrective decline within major uptrend

  • Medium-term breadth condition (% of Nasdaq 100 stocks above 50-day MA) has reached an overbought condition that led to significant corrective declines in past occasions on 16 August 2022, 1 December 2022, and 19 July 2023.
  • Broke below the 20-day moving average.
  • Watch the 15,690 near-term support as a potential downside trigger.

This is a follow-up analysis of our prior report, “Nasdaq 100 Technical: Relentless bullish move” published on 21 November 2023. Click here for a recap.

The price actions of the US Nas 100 Index (a proxy for the Nasdaq 100 futures) have inched higher since our prior publication and tested the first resistance of 19,160 last Wednesday, 29 November, and failed to make any breakthrough above it so far.

Several technical elements have not flashed warning signs of an impending potential corrective decline to retrace a portion of the prior five-week rally of 15% from the 26 October 2023 low of 14,060.

Overstretched medium-term breadth condition

Fig 1: US Nas 100 medium-term trend as of 7 Dec 2023 (Source: TradingView, click to enlarge chart)

The rise in the number of Nasdaq 100 component stocks that are trading above their respective medium-term 50-day moving averages has reached close to overstretched/overbought condition at 84% (recorded 77% on 1 December 2023) where past price actions of the US Nasdaq 100 Index has reacted negatively that led to significant corrective pullbacks on 16 August 2022, 1 December 2022, and 19 July 2023.

In addition, the daily RSI momentum indicator has broken below the parallel support at the 58 level after it reached an overbought region on 20 November 2023 which also advocates a potential corrective pull-back in price actions.

Broke below 20-day moving average

Fig 2: US Nas 100 minor short-term trend as of 7 Dec 2023 (Source: TradingView, click to enlarge chart)

Current price actions have broken below the 20-day moving average and the ascending channel support from 27 October 2023 low.

In the short-term, watch the 16,160 key short-term pivotal resistance and a break below 15,690 exposes the next intermediate supports at 15,380 and 15,175 (also the 50-day moving average & close to the 50% Fibonacci retracement of the recent rally from 26 October 2023 low to 29 November 2023 high).

On the other hand, a clearance above 16,160 revives the bullish tone to see the next intermediate resistances coming in at 16,310 and 16,590 (major swing high areas around the 16,772 all-time high level printed on 22 November 2021).

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Kelvin Wong

Kelvin Wong

Senior Market Analyst, Asia Pacific at OANDA
Based in Singapore, Kelvin Wong is a well-established senior global macro strategist with over 15 years of experience trading and providing market research on foreign exchange, stock markets, and commodities. Passionate about connecting the dots in the financial markets and sharing perspectives around trading and investment, Kelvin Wong is an expert in using a unique combination of fundamental and technical analyses, specializing in Elliott Wave and fund flow positioning, to pinpoint key reversal levels in the financial markets. In addition, over the last ten years, Kelvin has conducted numerous market outlook and trading-related seminars, as well as technical analysis training courses, for thousands of retail traders.