Will 50 Percent Fibonacci Level Mark Nasdaq Inflection Point?

by Sheldon McIntyre on December 27, 2012

By Sheldon McIntyre
In 2012 we were reminded of the magnitude of the NASDAQ Composite decline during the 2000-2002 bear market. In March 2012 the index rallied to the 50 percent retracement level of the foresaid bear market before falling into a correction. In September 2012 and October 2012 the index revisited the 50 percent retracement, but failed again to hold this key technical level, thus highlighting the potential for a Nasdaq inflection point.

Heading into 2013 I see three clear options for the NASDAQ Composite:

1. The index could finally push above the 50 percent retracement of the 2000-2002 bear market and the 1983 trend line.

2. The index could confirm a Double Top and Nasdaq inflection point by trading below 2726.68 (the June 2012 low). This would set up the potential for a decline to the 1978 trend line where it found support in 2010 and 2011.

3. Lastly, it could trade sideways with a slight downward bias, also confirmation of a Nasdaq inflection point.

click on charts to enlarge

nasdaq price chart with monthly bars

We should not overlook Semiconductor Index (SOX) and its importance to the outlook of the technology sector. The SOX has traded in a 100-point range since printing a high in February 2012. It has constantly found support at the 200-week SMA, but each bounce from the key long-term moving average has made a lower high. This needs to change if the NASDAQ is going to continue the 2009 bull market.

semiconductor index weekly bar chart

 

Related Reading by Sheldon McIntyre:Market Analysis: Trend Health May Indicate September Inflection Point

Twitter:  @hertcapital    @seeitmarket

No position in any of the securities mentioned at the time of publication.

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