Technicals Show Nasdaq Break Out
The technical picture for stocks is improving and the recent 7% slide in equities could have been the pullback many were waiting for. Although many market pundits continue to express belief that equities will continue to remain volatile and decline back below the recent lows, the technical outlook is positive and stocks will likely hit new all-time highs before they decline again to test support levels.
The NASDAQ 100 has been the best performing of the indices breaking out and hitting new multi-year highs on Tuesday. This comes on the heels of Janet Yellen’s testimony in front of Congress. The risk that Yellen would change the course of monetary policy came off the table on Tuesday, which allowed stocks to rally back to resistance levels. Yellen inferred that she was unconcerned about the recent EM issues, and believes that any dip in economic output in January was a function of the weather and likely transitory.
Momentum on the Nasdaq is strong as the MACD (moving average convergence divergence) index generated a buy signal. This occurs as the spread (the 12-day moving average minus the 26-day moving average) crossed above the 9-day moving average of the spread. The index moved from negative to positive territory confirming the buy signal. The relative strength index moved higher with price action reflecting accelerating momentum while printing near 60 which is on the upper end of the neutral range.
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