Nasdaq Reaches Long-Term Double Fibonacci Target -" Now What?

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As a market forecaster, I’m obsessed with finding the next resistance cluster that will serve as target for the next rally.

This resistance cluster for the Nasdaq-100 (QQQ) was fairly easy to spot as it was made up of two long-term Fibonacci levels.

The May 19, Profit Radar Report said this about the double Fibonacci target: 

“Real serious overhead resistance doesn’t come into play until 3,266 – 3,280. That’s 8% away and it should take at least one noteable correction and several more months to get there.”

Several months (and a few minor corrections) later the Nasdaq 100 has arrived and slightly exceeded 3,280.

The Nasdaq-100 chart below shows the 61.8% Fibonacci retracement of the points lost from 2000 to 2002 (at 3,280.29) and a Fibonacci projection level originating from the 2002 low is at 3,266.

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Now What?

Quite frankly, I thought that the odds of a major market top once the Nasdaq reaches 3,280 were greater than 50%. But I may have to reconsider this expectation or at least put it on hold for now.

A close above such key resistance is generally bullish. Unfortunately, I have a hard time finding another resistance cluster for the Nasdaq (^IXIC). The 78.6% Fibonacci retracement is still 20% away and premature.

De-Isolating the Nasdaq

The Nasdaq doesn’t trade in a vacuum and it often helps to see what other indexes are doing. 

The S&P 500 (^GSPC), which sports a well-defined trend channel right now, is considerably closer to its trend channel resistance than the Nasdaq-100 to its 78.6% Fibonacci resistance.

The Dow Jones (^DJI) is almost trading in its own world right now. A big earnings disappointment by IBM – the biggest Dow component – sent the Dow marginally lower on Thursday while the S&P 500 (SPY) and Nasdaq closed higher.

Summary

For now the Nasdaq is above support (prior resistance) and the trend is up. In fact, the Federal Reserve and Washington politicians have created a ‘chaos environment’ that could keep prices buoyant for significantly longer. 

To find out how the Fed and incapable politicians inadvertently created the perfect bullish chaos click here:

Did Bernanke and Incapable Politicians Create the Perfect Bullish Chaos?

However, not everything is hunky-dory. The S&P 500 is about to hit resistance that may reject this advance. Two long-term cycles, which predicted the 2000 and 2007 tops, project another market top in 2013/2014. Click here for more details on the S&P 500 cycles.

My take on the market along with a forecast based on technical analysis, sentiment and seasonality is available via the Profit Radar Report.

Simon Maierhofer is the publisher of the Profit Radar Report.

Follow Simon on Twitter @ iSPYETF 

 



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