Does the Divergence in Nasdaq Indices Mean the Tech Rally Is in Danger?
The levels to watch are the September highs.
That said, I wanted to dig into the divergence a bit further and point out some important trends and levels to follow. First, let's look at the trends and divergences. The first chart below is the S&P 500 (INDEXSP:.INX) vs. the Nasdaq 100 (brawn vs. brawn). The second chart is the Nasdaq Composite vs. the Nasdaq-100.
So what are some key levels to watch? Well the most obvious levels to watch for most market observers are the September highs. And although the Nasdaq Composite could reach new highs this week, I am clearly drawn to the Nasdaq-100 divergence scenario. The Nasdaq-100 is over 3 percent off its highs and nearing important resistance. If the index cannot make it through the 2800 level, then it may be signaling a stronger topping signal on the September highs. So, why do I think the 2800 level is so important to the Nasdaq 100 divergence scenario? Two main reasons, both technical:
- 2800 is the approximate target of a measured, corrective move (A-B-C)
- It's also near the .764 retracement level (2788).
Editor's Note: Andrew Nyquist is an independent investor based in the Minneapolis area. This article originally appeared on his investing and economics site, See It Market.
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