NASDAQ Composite Index Chart – November 6, 2009
I charted the NASDAQ Composite Index ($COMP) after the markets closed on Friday, November 6, 2009 when it finished the day at 2,112.44.
The tech heavy index is starting to show some strength again after coming down off its highs of the year. The key reversal of the down trend came when $COMP hit the trend line of higher lows. The same trend line that started a few months ago as resistance and then acted as support for the following few months came back into play this week and held the index up. This was welcome news for the bulls to see after the index broke below another, longer trend line of higher lows last week. Now this broken line of support could be the new line of resistance as the $COMP fights its way higher.
The 100 day moving average (not shown) is moving higher and is close to 5% below the current price near the 2,000 mark in case this trend line falters soon. The moving averages in play right now are the 10, 20 and 50 day. They are somewhat hard to see since I took this chart out for six months to capture the trend lines. The 10 day moving average was the first to break and then became the first one to have the index pull back above it close to the same time the 50 day was passed again. Friday morning the $COMP opened on the 10 day moving average, held support and moved higher to close above the 10 and 50 day averages. The point of resistance for Friday came from the 20 day moving average. It broke before the $COMP really dropped hard a couple of weeks ago and is once again a hurdle we need to see the NASDAQ deal with before having room to run.
Along with the trend line of higher lows offering support and the moving averages appearing to be close to opening the door for a run higher, the Williams %R indicator is giving a bullish signal too. I’ve circled a few of the past instances when %R has shown the same move out of the oversold area. You can see each one marked the beginning of a new rally. Not every rally had strong legs, but for the past six months each point has marked a new near term low. That’s what it appears we’re seeing now. Watch on Monday to see if the NASDAQ Composite Index can climb above its 20 day moving average and if it does we should see more than a few ticks higher in the days to come. If it doesn’t, stay nimble.
Comment by Michael
Any thoughts on a head and shoulders formation? I trade naked NDX or MNX options – your chart is great info…. mnxoptions.blogspot……..
Comment by Alex Fotopoulos
Michael, thanks for the compliment. I don’t typically look for head and shoulders patterns as much as straight trend lines, but I see what you’re talking about. If you’re right, the COMP could be ready for a bigger run. That could happen and have it still stay within the trading channel I drew.
Comment by Joe
Thanks much for introducing the idea of selling puts to buy stocks. I’ve had both good and bad results with it (stock took off while I could only make the premium for put) — but overall I think its an excellent approach to make money.
However, I am surprised to see that you have a loss (acc. to your current portfolio page) since the blog inception. I enjoy your commentary and your approach to investing/making money. Please continue.
Sorry for the off-topic comment…
Joe
Comment by Alex Fotopoulos
Thanks Joe. I don’t mind off topic compliments at all.
I had a horrible year in 2008 and I’m still making up for it. That was a “black swan” year and one I didn’t plan well for and cut my losses early enough. Thanks for reading. I should be back to an overall profit before the end of next year I think. I stayed fairly conservative this year with my job in jeopardy most of the year, but I’m starting to add risk into my account more each month. Selling puts is certainly not fool proof, but I agree it’s a great approach to investing when managed correctly.