Nasdaq At New Highs But Caution Flags Arise

A few caution flags emerged on Monday in spite of the new all-time highs recorded for the NASDAQ Composite.

1.    Market volume was light. After Friday’s spike in volume, Monday QQQs ETF saw below average daily volume.

2.    The momentum indicators that I use that measure tops, bottoms, and big trends show a divergence between momentum and price.

The momentum on the NASDAQs last trip to new highs on July 13th had higher momentum than Monday’s, with a new all-time high. This type of divergence can often become a leading indicator that precedes a top. 

3.    Couple the lower volume with the divergence in momentum and one can conclude that the bulls are growing less enthusiastic.

4.    The last swing high  on July 13th was at 269.79, which became the 6-month calendar range high. That is yet another indicator we use that often becomes the top or bottom or launch pad for trading an instrument over the next 6 months.

Monday’s high was 270.15 but QQQs closed at 269.21 or under the 6-month calendar range high.

ETF Trading Levels for Tuesday, August 4:

S&P 500 (SPY) 323 now pivotal support 332.58 a gap to fill 

Russell 2000 (IWM)held the 200-WMA and now has 150 resistance 

Dow (DIA) 270 resistance 262.50 support

Nasdaq (QQQ) 262 support and 270 resistance

KRE (Regional Banks)Cannot get out of its own way

SMH (Semiconductors)165-168 pivotal-170 resistance 

IYT (Transportation)172.55 support 179-180 resistance 

IBB (Biotechnology) 142 resistance 136 support

XRT (Retail) Looks like Granny wants 50.00 

Volatility Index (VXX) Watching carefully as holding the 200-DMA at 27.90

Junk Bonds (JNK)Risk appetite waned but held the key support at 105.30

LQD (iShs iBoxx High yield Bonds) 137.50 support

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The author may have a position in the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.