The US Nas 100 Index, which serves as a proxy for the Nasdaq 100 futures, has experienced a significant decline recently, approaching the upward-sloping 50-day moving average. However, there are indications that the downside momentum has started to ease. In this article, we will analyze the current state of the index and discuss the potential for a short-term bounce.
Recent Performance and Support Levels
The Nasdaq 100 Index has seen a sharp drop towards the 16,160/125 intermediate support, as highlighted in previous analyses. This decline came after a bearish reaction from the 16,990 intermediate resistance level, which occurred after the index reached an all-time high of 16,999 on December 28, 2023. In the past week, the index has declined by approximately -4.76% from its all-time high level.
One of the contributing factors to this decline was the weakness in Apple’s share price, which recorded a weekly loss of -6.41%. Apple, being one of the major components of the index, underperformed within the group of mega-capitalization US equities due to concerns over waning demand for its latest iPhone model.
The current decline has almost reached the 50-day moving average, which is a significant level of support. Additionally, the former swing high areas of November 22 and November 29, 2023, are now acting as pull-back support at the 16,160 level. Furthermore, the 61.8% Fibonacci retracement of the prior minor uptrend phase from December 4, 2023, low to the December 28, 2023, high also provides support at this level.
Despite the recent decline, there are positive signals that suggest a potential short-term bounce. The hourly RSI momentum indicator has displayed a prior bullish divergence signal at its oversold region before a bullish momentum breakout on January 5, 2024. This breakout increases the chances of a minor recovery scenario at this juncture, as the downside momentum from last week’s decline has eased.
While there is a possibility of a short-term bounce above the key short-term support level of 16,160, it is essential to monitor the index closely. Failure to hold above this level would invalidate the recovery scenario and potentially lead to a continuation of the minor corrective decline within the major uptrend phase. In such a scenario, the next intermediate support level to watch would be at 15,870/820.
The Nasdaq 100 Index has experienced a notable decline, reaching important support levels such as the 50-day moving average and former swing high areas. However, there are positive signs indicating a potential short-term bounce. Traders and investors should carefully analyze the developments in the index and be prepared for various scenarios as the market continues to evolve.
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