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NASDAQ gets bullish above 1,619

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It's too early to say, "It's a bull market" for the NASDAQ, but traders there will take today's current 2% gain. I still feel bulls need to see a break above the 1,619 level on a sustained basis for any type of meaningful move higher to evolve.

NASDAQ Composite Index - last nine months

The NASDAQ Composite (COMPX) chart looks very similar to the S&P 500 chart in the 01:00 EST Update. There's that hurdle at 50% "fitted" retracement of 1,618 still to be cleared. This chart along with the SPX chart and the 1,082 level there make for good correlation. I think a move above that level with selling in bonds (higher YIELD) could see a rally attempt to our next level of retracement. We'll also want to me monitoring the 50-day moving averages on these charts for any signs of resistance.

Reversal of fortune?

Earlier today, the longer-end of the bond market and the 30-year saw selling, but that has reversed itself later in the day. Many traders are talking of some asset allocation taking place and some fine tuning of positions. I feel a YIELD above the 5.345% level will continue to see some "buy side" influence for stocks, but we need to be alert to today's reversal. The 10-year YIELD ($TNX.X), 5-year ($FVX.X) and 13-week ($IRX.X) YIELDS all remain in the green and indicate selling.

30-year YIELD Chart - last nine months

Perhaps the action here in the 30-year helps explain some of the hesitancy we're seeing in the S&P 500 (SPX.X) and NASDAQ Composite (COMPX) in their being able to clear some retracement levels to the upside. I'm not going to question bond traders analysis that today's action in the 30-year YIELD late in the session was due to asset allocation and some positioning between the 10-year and 30-year as they square positions. Equity bulls will want to see this YIELD stay above the 5.34% level.

With the bond market now close, we'll have to wait until tomorrow morning to see how things shake out. For now, bullish traders may be well served to wait for a break above resistance levels on the SPX and NASDAQ Composite since we've lost bond YIELDS for the remainder of the session.

Jeff Bailey
Senior Market Technician
Option Investor

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