Nasdaq (NDX QQQ) Still trending higher with no signs of panic but RSI needs attention

Facebook (FB) the star performer up over 4%.
All mega tech FAANG names rally as yields move lower.
Big tech stocks all higher and near record highs.

Update after the close: Another record high and another record close for the Nasdaq as a broad sweep of mega tech names pushed the index higher. Facebook (FB) was the standout performer joining the $1 trillion market cap. club with a strong 4% surge to $355.64. The catalyst was the federal court dismissing the Federal Trade Commissions' (FTC) antitrust lawsuit against Facebook. The Nasdaq once again strongly outperformed the other major indices with the S&P up 0.2% while the Dow and Russell 2000 were lower. The Nasdaq futures contract (NQ) has just crept into the overbought region on the Relative Strength Index (RSI) joining the cash index (NDX) and ETF QQQ with all three now showing as overbought on the RSI.

Update: Well more records for the Nasdaq on Monday but the broader market is not so sure. AAPL, TSLA, FB and AMZN all put in strong showings and leading the Nasdaq higher but the S&P is flat while the Russell 2000 is lower by 0.5%.

Equity markets continue to remain strongly bullish with the TINA trade ("there is no alternative") and those buying the dip continuing to reap strong profits as a rising tide lifts all boats, even Danaos Corporation (DAC). Friday saw modest losses across some Nasdaq names with the tech index closing just in the red down 0.14%, while the S&P 500 hit yet another record high close.

The canary in the coalmine we identified last week is still alive and chirping (Russell 2000), but it still needs to take out this larger range play it has been stuck in to free up further gains for all indices. It is moving in the right direction though. Range breakouts, as we said last week, can be powerful but so can double or this would be a triple top. So watch this space closely. Given the trend in equity markets and how well they have reacted to the Fed's increasingly hawkish (higher rates) talk, one would have to bet on the break-out scenario for the Russell. The Moving Average Convergence Divergence (MACD) indicator also seems to be following this logic and is about to give a bullish crossover.

The put-call ratio is far from a perfect indicator but does give a guide to investor sentiment. The ratio itself can skew around, especially when we have had quadruple witching and Russell rebalancing on consecutive Fridays, but the 9- day moving average shows the put-call ratio steadily declining as investors turn against purchasing puts, be it for speculative or hedging purposes. There is a general inverse correlation with the equity market. The put-call ratio rises when investors buy more puts as they are more bearish so markets could or should also be bearish. May saw a steady decline in the ratio as it seems everyone grew tired of waiting for the dip.

Nasdaq (QQQ NQ) forecast

Onwards and upwards is the way forward with Friday seeing a modestly lower close, but nothing to break the bullish trend. Advance/Decline line still following the market higher. This is a market breadth indicator showing the number of stocks advancing minus the number of stocks declining. The up move has slowed but is still held in place by the 9-day moving average support, currently at 14,226. This is close to our key short-term support at 14,250. Friday gave us an inside candle, which is an indecision candle. This candle is a consolidation candle in a breakout, but in a strong trend it is a bit more neutral. So for Monday, we need to see a bit more work done and not witness another inside candle.

Support at 14,250 and then 14,050, the April and May series of highs, acted as a "buy the dip" double top. Medium-term support is at 13,462, with 12,950 the double bottom from mid-May setting up this record push and strong trend channel.

The Relative Strength Index (RSI) is a bit toppy and close to overbought. It may signal another dip and buying opportunity. That appears to be the strategy for 2021 so far, with the market saying, "If it ain't broke, don't fix it."

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