LIVE MARKETS-Nasdaq composite: Confronting an internal struggle

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NASDAQ COMPOSITE: CONFRONTING AN INTERNAL STRUGGLE

The Nasdaq Composite .IXIC is roughly flat with early December levels. That said, it did end Tuesday down about 2.6% from its December 16 record closing high.

Bulls are hoping weakness will ultimately prove to be a time correction, characterized by just shallow losses.

That said, a check of one measure of the composite's internal strength shows that it remains challenged:

On December 6, the Nasdaq New High/New Low (NH/NL) index hit 73.5%. However, it once again stalled at the resistance line from its early 2023 high.

After falling to as low as 34.9% on December 26, the measure chopped its way back up to 55.1% on January 31. It ended Tuesday at 49.8%, and is threatening to break its rising 10-day moving average.

Of note, over the past six-to-nine months, the NH/NL index has been struggling to trend. Indeed, this measure has been oscillating in a contracting range defined by the resistance line from its early 2023 high, which is now around 72.5%, and the support line from its November 2023 low, which is now around 37.8%.

Thus, while this measure remains trapped in this range, both Nasdaq rallies and bouts of weakness may continue to be relatively contained, and short-lived.

A thrust above 55.1% can at least suggest further strength toward the resistance line. A breakout above the resistance line may suggest potential for much broader Nasdaq strength (the measure peaked at 96.4% in early 2021 followed by a protracted period of dissipating energy into the composite's November 2021 peak).

Conversely, a breakdown below the support line from November 2023 can suggest potential for greater Nasdaq instability, potentially leading to a washout.

Additional 2024 troughs were at 27.1% and 17.7%.

The NH/NL index was at sub-10% levels when the Nasdaq ended its July-October 2023 10%+ correction.

(Terence Gabriel)

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