Chart of the day: Warning signal for Nasdaq
It took seven whole years for the tech-heavy Nasdaq Composite Index to break above the record high of 4,800 points set in 2000. Since then, the rally had kept to a steep but narrow trend channel throughout last year – until possible over-exuberance set in this year. After gapping lower in March, the index retested the 200-day simple moving average this week. With so many investors favouring the index tracking and momentum trading styles, the risk is they will all be bailing out simultaneously. The 50-day moving average has turned down, and were it to cross below the 200-day one, we would get a “death cross”. This could trigger the exodus we are worried about.
Nicole Elliott is a technical analyst