NASDAQ Composite ($COMPX) Chart

I haven’t charted the NASDAQ Composite Index ($COMPX) here before now.  I think I might have taken a good time to give it a look.  The chart I’ve drawn shows the past year of the NAZ’s weekly price action.  The high of last week coincides with two lines I drew, the overall high from July and the rising trend line of higher lows.  Both can be tough hurdles to get over.  If that isn’t enough, the volume from the past six weeks has been below average.

With weak buying power going into those two lines I don’t see the $COMPX being able to break it without some big news coming with it.  One might ask if the Fed rate cut was big enough news.  I’d typically say yes, but the volume doesn’t support that argument.  Also, the Fed cuts are becoming less meaningful for weeks after the cut at times when most of us expected some type of cut.  I think a half point was more than a lot thought we’d get, but then again many called for it and I thing the price action starting in August started to show that mind set.

August is important because that’s when the Fed cut the discount rate on loans to banks.  Kopin Tan pointed it out in the week’s Barron’s.  The S&P 500 is already up 11% since that August 16th cut.  The theory is worth considering that we could be near the end of this Fed induced rally and could be due for a break.  Pick any of the three lines I’ve drawn below Friday’s close and I could make an arguement for why we’re going back to any of them before finding footing again.  I’d rather see us flatten out for a while while everyone catches their breath and the trend lines catch up to us, but that’s not how it typically works.  You never know though, fourth quarters are typically good, but hopefully not like Septembers are typically tough.  The month ending today was quite good and left a lot of money on the sidelines in the pockets of those who feared a near-term recession.

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