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Will 50 Percent Fibonacci Level Mark Nasdaq Inflection Point?


Plus, take note of the Semiconductor Index and its effect on the market.

In 2012, we were reminded of the magnitude of the NASDAQ Composite (INDEXNASDAQ:.IXIC) decline during the 2000-2002 bear market. In March 2012, the index rallied to the 50 percent retracement level of the aforesaid bear market before falling into a correction. In September 2012 and October 2012, the index revisited the 50 percent retracement, but failed again to hold this key technical level, thus highlighting the potential for a Nasdaq inflection point.

Heading into 2013, I see three clear options for the NASDAQ Composite:
  1. The index could finally push above the 50 percent retracement of the 2000-2002 bear market and the 1983 trendline.
  2. The index could confirm a double top and Nasdaq inflection point by trading below 2726.68 (the June 2012 low). This would set up the potential for a decline to the 1978 trendline where it found support in 2010 and 2011.
  3. Lastly, it could trade sideways with a slight downward bias, also confirmation of a Nasdaq inflection point.

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We should not overlook the Semiconductor Index (INDEXNASDAQ:SOX) and its importance to the outlook of the technology sector. The SOX has traded in a 100-point range since printing a high in February 2012. It has constantly found support at the 200-week simple moving average, but each bounce from the key long-term moving average has made a lower high. This needs to change if the NASDAQ is going to continue the 2009 bull market.

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This article by Sheldon McIntyre was originally published on See It Market.
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