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Andreas Zanin
Analysis | July 13, 2021

Outlook and Forecast: NASDAQ

The Nasdaq has moved sharply higher but is the move going to continue or are we going to see a correction? Our views below…

The Nasdaq has made huge gains and outperformed other indexes such as the SP500 by a large margin:

The rise in stock markets generally has pushed them to the highest P/E ratios in history. The recent breakout to the upside in the NASDAQ was a low volume breakout and has seen the crowd come into longs and chase the market higher.

We would be alert for corrective action on a break below support with a stop above the top of the channel (15000) for a move down potentially to major support.  If we continue to rally the short entry would be raised – All elevated-up moves tend to blow off to the downside and retrace a large percentage or all of the accelerated up move.

We have seen a move lower in NASDAQ “VIX”, VXN which signals complacency and a bullish extreme the market is clearly trending higher but the uptrend is elevated and we may see a blow-off to the downside.

All stock markets have moved sharply higher and despite the overbought condition, many traders are saying “this time its different” in terms of valuations don’t matter the Fed will NOT allow the market to fall. Our view is this is misplaced optimism…

History however shows that any big overshoots in terms of value are met with major corrections which happen quickly, are severe and the majority don’t see them coming.. We think its a good idea to be cautious if long stocks or if you are a contrary trader look for potential shorting opportunities.

 

Research provided by LearnCurrencyTradingOnline.com

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