Bullish Nasdaq Set To Face A Major Inflection Point

The tech heavy Nasdaq index has led the 3 major indices with the surprising V shaped recovery off the Dec 24th lows. This week the Nasdaq 100 is set to hit the old all time high resistance level of 7,655 as well as the original long term uptrend line on the weekly chart (shown with green rectangle box).

The reason this is important is because the market is facing two major resistance areas simultaneously which could cause disruption to the current uptrend for 2019. When the long term uptrend was breached in late Oct 18, the market gave the signal that something was wrong and to pay attention.

Given the bullishness of the market lately, it's likely we will retest the old resistance level this trading week. The key question once this has been achieved is what happens next?

With the steepness of the rally in 2019 and the uptrend line shown, we can only tolerate a minor pullback / consolidation period otherwise we could see the market break the uptrend line into the red circle area.

If this occurs we would have to review any bullish positions on the Nasdaq 100 index and show caution to potential short term volatility and draw-down period ahead.

Given the price action is currently sitting comfortably above the weekly chart moving averages, I'm suggesting that we could see a number of weeks of volatility and consolidation ahead, rather than a suggestion it's time to look at potential shorts for the Nasdaq index.

My switch to an overall bearish stance for the Nasdaq 100 will occur when I see the price action form a lower high and lower low pattern on the daily chart. Until then, I'm only highlighting caution ahead for the major inflection point above.

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