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Nasdaq 100 - The case for a "bear market rally"

In our previous post, we warned about the bear market rally. Since then, the Nasdaq 100 index has reversed to the upside and continues to climb. Most titles within the U.S. stock market have rallied hard so far; however, in our opinion, these massive moves are not characteristic of a healthy market. Instead, they are indicative of the bear market. At the same time, we do not expect bearish fundamental factors like the prospect of higher interest rates in the U.S. and economic tightening to change in the next quarter. Therefore, we predict further deterioration of the financial situation and lower prices for the stock market (from the current levels). We do not know how high will the bear market rally go; however, we have very little faith that the bottom is in for the stock market.

Illustration 1.01

In our previous idea, we noted that the breakout above the sloping resistance indicated by the yellow line would be bullish; indeed, we said that it could potentially mark the beginning of the bear market rally. Since then, the Nasdaq 100 index has gained approximately 5%.

Technical analysis - daily time frame
RSI, Stochastic, and MACD are bullish. DM+ and DM- are due to perform bullish crossover, which could bolster a rally further; however, failure will foreshadow the return of selling pressure. Overall, the daily time frame is bullish.

Illustration 1.02

On the weekly chart, NQ1! retraces towards its 20-day SMA (acts as a correction of the downtrend - similarly like on the daily time frame).

Technical analysis - weekly time frame
RSI, MACD, and Stochastic are turning neutral. DM+ and DM- are bearish. Overall, the weekly time frame stays bearish.

Please feel free to express your ideas and thoughts in the comment section.

DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not serve as a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.