The Nasdaq is a growth index. This classification is notable because rising interest rates hit the growth side of the market hardest. So whether or not we have seen most of the move in yields is an important question? For example, a base will suggest possible value. However, this is not yet the case; technically speaking, the Nasdaq is in a very precarious position.
On a monthly chart, FXCM's CFD, the NAS100, trades between the lower blue and red bands in the bearish zone. Moreover, the red Bollinger bands are heading in opposite directions (black ellipses). This divergence is an effect of the increase in volatility. We have two concerns.
Firstly, the stochastic is near 20 (green rectangle). If it hits this level and maintains, underlying bearish momentum will pressure the index further, possibly extending the Bollinger divergence. Secondly, the bear market will intensify if the top red Bollinger turns down and tracks the bottom Bollinger lower
A basing of the index or a movement back into the neutral area between the blue bands will be positive. However, for this to happen, the stochastic will need to turn and move above 20. This scenario will very much depend on whether we have seen the highs for the US 10-yr or not.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.