Nasdaq Bearish Divergence Could Lead To 10% Correction

11 Şub 2020

Take a look at the nasdaq 100 daily chart. We've made another ATH and the bullish trend remains intact. However, there are technical signs of weakness/fatigue, and last time we saw this in 2018, we got more than a 10% correction. The daily RSI and the ADX-DI are making lower highs as price makes higher highs. In the past, this type of divergence on multiple indicators has led to harsh corrections. The bullish trend is quite extended with gains of 60% from the lows of December 2018. While bearish divergences can also correct in time through prolonged sideways price action (see July-Sep 2019), there are plenty of macro-economic risks that may make it more difficult to sustain a flat few weeks without sellers showing up. It's also possible we make a small dip, only to "double top" a few weeks later.

So while this still may not be "the top" (because the fed will bail us out regardless, right?), this is once again a time to be cautious, not greedy. Consider re-evaluating your portfolio performance and goals considering your time horizon with the bias that 2020 is looking more like 2018 than 2019. Watching for bearish trades to develop on smaller time frames and would absolutely be taking profits were I still long any Nasdaq names.