Analysis was created by Marcus Muehlbauer MD PhD aka “Ben Bernanke at www.tradesignalonline.com”

Nasdaq 100: Could it go any higher?

Dear Investors,

It has been a while since the last analysis of the Nasdaq 100. The last analysis was from January 2011.
Investor sentiment is at a new low according to the American Association of Individual Investors (AAII). Only 25.6% are bullish for the next 6 months. This is usually not a time where major crashes happen. But let’s just go to the charts to see what they tell us.

I always like to start with the overall picture and therefore I look at the monthly chart first. In my opinion we triggered a big “cup and handle” formation in late 2010 (chart 1). With some imagination one could even argue that we then triggered a huge “inverse shoulder head shoulder” pattern early 2011 with huge implications on the long term goals (chart 2). Either way the long term targets remain at 3400 as long as we do not drop below 2000. Ideally we would defend already the 2200 area. But the monthly candle in almost all international indices (including commodities) should alert the bulls. We have two so called “hanging men and probably a so called “bearish engulfing” (pink arrow). That usually means lower prices to come in the next couple of months. But…if the “cup and handle” or “inverse SHS” pattern keep up with what they usually promise they should overwrite the bearish candle pattern and the bull run should continue.The weekly chart is clearly still bearish and somewhat overbought (indicators not shown). In addition we have a so called “bearish wedge” pattern. This pattern usually occurs at the end of major upmoves. Interestingly we broke the lower trend line but the bulls immediately came back in the middle of last week. A break of the trendline on a weekly basis would support further down. But the major moving averages are still on the rise (bullish sign).When we zoom into the daily charts you can see that we are pretty much oversold. Almost all indicators support at least a bounce. Moreover the last couple of days the bulls tried to defend the broken trend line. If the bulls can stay above this trend line the next couple of weeks and are able to rise to new highs the overall anti cyclic sell signal from the long term charts will be negated again.Conclusion:

Overall I think that we are ready for a bullish bounce from the trend line in the daily chart. Therefore we increased our long positions last week once again after we sold almost 50% more than 2 weeks ago. The overall long trend will only remain intact if we can break above the last highs again. If we stall or break below the trend line in the daily chart again one would have to sell the long positions again. Actively shorting the markets is not an option right now if you are an end of day trader. The sentiment and short term indicators do not allow a major drop. But things can change quickly these days. And therefore tracking the markets on a daily basis remains key.

Disclaimer: Past performance is no indication of future return. The content of this analysis is without warranty of any kind. Trading can result in substantial financial losses. Ask your financial advisor.

Have a great June

Marcus Muehlbauer MD PhD