Nasdaq 100 Joins Indexes in Confirmed Caution Phase

What is a confirmed Caution Phase? 

Some of you might know it as a warning phase. 

Simply put, it occurs when the 50-DMA remains above the 200-DMA but the instrument's price trades below the 50-DMA. 

The slope is another factor. When the price is below the 50-DMA but above the 200-DMA, we look at the slope on the 50-DMA. 

The slope on the Daily chart continues to point up, making this a weak caution phase now. A downward slope on the MA would be more alarming. 

Until the end of this week, the July calendar range is another interesting line. The horizontal green line on the Daily chart aligns with the current price of QQQ. 

The $500 level thus far is turning out to be support. 

But what happens if that level breaks? 

That is when we zoom out and look at the weekly charts. 

The QQQ chart on the weekly basis is still in a bullish phase. 

While the 50-WMA is above the 200-WMA, and the price trades above both the MAs, that is a good sign. 

Should QQQ fail 500, we can look at a target of around $473 or the 50-WMA. 

Interestingly, QQQ has not traded below the 50-WMA since January 2023. That breakout turned out to be the best buy opportunity in the last 2 years. 

Amazing that here we are, 2 years later and into the new calendar range.  

We strongly believe that once the January Trend Trade is set, along with the Daily and weekly charts we see here for NASDAQ, the next direction will be very clear and offer a solid risk/reward. 

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A reminder from this past weekend’s Daily on the Macro: 

What are some (macro) conclusions early on? 

1. If the Federal Reserve stays pat, commodities already somewhat immune, can continue rising. However, equities want lower rates so at this point, stock market gains can be muted. 
2. Commodities prices rise more, and the Fed raises rates. This scenario, while a possibility, seems unlikely as that will not be received well by the markets and might not be enough to control commodities prices regardless. 
3. The Fed goes ahead with lowering rates, the least likely scenario right now, but the economy sputters and they choose to ease rather than stay put or tighten. Of course, this might help areas of the market and would definitely goose inflation. 

ETF Summary  

(Pivotal means short-term bullish above that level and bearish below)  

• S&P 500 (SPY) Possible mean reversion if it can retake 580  
• Russell 2000 (IWM) 200-DMA at 215 holding so far 
• Dow (DIA) Like it if it can hold 421 
• Nasdaq (QQQ) 500 key area to hold 
• Regional banks (KRE) Under 55 we get concerned. Over 60, relax  
• Semiconductors (SMH) 237 is our big line in the sand 
• Transportation (IYT) While under resistance at 70, still holding-watch this 
• Biotechnology (IBB) its 130 or bust   
• Retail (XRT) Has to hold around 76   
• iShares iBoxx Hi Yd Cor Bond ETF (HYG) 78.00 key area to hold 

Written By: Michele Schneider