Remember 1999 and the "new era" in tech? Are we about to see a repeat performance?
This, of course, is a different NASDAQ perspective than was presented here last week. Now, before we get carried away in any prospective melt-up here, rather than a 1999 repeat performance, it is possible wave 3 of (c) is but one more bump higher off June low before reaching its completion. In other words, wave 3 might be largely formed already.
NASDAQ's new 52-week high-low differential is one technical measure we might interpret as substantiating this probability. Its best reading coinciding with NASDAQ's advance since mid-November 2012 was in early July (right when a presumed wave iii of 3 was peaking). That best, too, remained but a handful of NASDAQ-listed issues shy of the very best reading registered by NASDAQ's new 52-week high-low differential since March '09 bottom, which came in April 2010. Yet shy it was, and this speaks volumes about the overall market's underlying weakness four years into an overdose on Confetti candy. The odds of a melt-up at this point, a la 1999, seem rather slight in fact. The degree to which NASDAQ's high-low differential has come in since early-July certainly supports this conclusion.
Still, seeing the manner in which wave v of 1 extended, we might look here for wave v of 3 to do the same, at least to some degree. The question is whether in the process NASDAQ's RSI (top panel) and MACD (bottom) will best their respective May peaks. We have reason to suspect they won't.
It's a tough sell claiming NASDAQ is displaying such notably positive technical character as to suggest the long-term trend line it broke in '08 is about to be decidedly penetrated to the upside after having consistently offered resistance ever since. We might rather look to NASDAQ's choke on trend line resistance during the first half of 2011 for what's likely in store over coming weeks, this leading up to a hard turn south, one quite possibly of historic dimension.
We'll be keeping a close eye on NASDAQ's underlying technical state as it completes wave 3 of (c) over coming days and forms wave 4 of (c) throughout some part, if not the remainder, of August. Simply put, we're looking for confirmation NASDAQ's July peak is one from which underlying technical weakness increases. This we expect while NASDAQ more or less holds its ground during the month of August overall. We might not be in possession of the technical confirmation we're looking for (i.e. wave 4 versus wave 2 technical deterioration) until very late in the month.
Hmmm, come to think of it, we might find NASDAQ finishing August on its low and slightly lower than it closed out July today. Were a negative monthly reversal to happen in the process of NASDAQ's Composite Index forming wave 4 of (c) over the course of August, heightened would be possibility wave 5 of (c) proves a so-called "5th wave failure" (i.e. fails to rise above [yet to be completed] wave 3 of (c)).
Obviously, time will tell. For now let's assume the bulk of July's gains are not going to be given back in August, and NASDAQ's advance since mid-November 2012 remains in progress. First glances per immediate prospects hint NASDAQ might be poised to melt up. A closer look under the covers, though, raises probability 2013 will not deliver a 1999 repeat. NASDAQ looks more 2011 here.
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