Published November 22, 2019
Below is a chart from Chris Kimble showing the Nasdaq 100’s rise over the past decade. The green trendlines define the uptrend. After spending much of the spring and summer bouncing around between 175 and 195, the QQQ (the trading symbol for the Nasdaq 100) pushed above 200, where it has held all of November. The blue % numbers on the chart (e.g. 100%, 161.8%, 261.8%) define the possible Fibonacci levels the QQQ could react to. The QQQ has appeared to find support at the 161.8% level, which clears the way for a move to the upper bound of the green trendlines. That move to the upper bound would take the QQQ to about 285, a +40% upward move from the current level. For reference, if the QQQ breaks back below this support level, the lower boundary of this green uptrend channel is around 180, 10% below current levels. Mr. Kimble suggests that we would need to decisively break below the green trendline and 180 for the decade-long uptrend to be in danger.
Using Fibonacci lines as a way to define market patterns is rather common among technical analysts. Technical analysts are folks who use price data to determine market trends and expected future price behavior. If you’re interested in learning more about the Fibonacci ratios and approach, try this article from Investopedia.
With quarterly earnings season largely completed and stocks having rattled off six consecutive weekly gains, it’s no surprise that stocks ran sideways this week. That trend began with a flat trading session Monday on a virtually empty news day. Tuesday brought weak reports from retailers Home Depot (HD) and Kohls (KSS) to pressure stocks. However, the Nasdaq managed to post a gain of +0.2% as buyers stepped in to tech shares. A slight scare in the progress on trade talks with China gave investors reason to reduce risk Wednesday, with shares falling almost -1% mid-day before recovering to a -0.4% result. Positive earnings from Target (TGT) and Lowes (LOW) supported the recovery. Another -0.2% was lost Thursday despite a blockbuster merger in the brokerage space with Schwab (SCHW) buying TD Ameritrade (AMTD). Friday saw stocks regain +0.2% on strength in financial shares with an additional group of retail reports also providing support.
After six weeks of consecutive lift, stocks posted a slightly negative week. The Nasdaq 100 (QQQ) and the Russell 2000 small-cap index (IWM) closed the week with respective losses of -0.53% and -0.44% while the S&P 500 (SPY) finished almost flat at -0.27%.
Warm wishes and until next week.