Nasdaq Composite Index Hits Record Intra-Day High on Bio-Tech Strength

The Nasdaq Composite Index closed at 5,379.92, up +11.11 (+0.21%) higher from its previous close of 5,368.81. Today, the index traded between 5,360.56 and 5,403.86 before settling. The 52-week range presently sits at 4,209.76 and 5,403.86.

The Nasdaq’s volume of 440 million shares trading hands today was much higher than Monday’s 391 million. There were 1,341 (46%) issues that advanced, while 1,403 (48%) declined (151 unchanged). 252 companies recorded record new highs, while 78 made new lows.

Today, it opened +2.17 (+0.04%) higher at 5,370.98; however, the index formed today’s low (in negative territory) just 20 minutes after the open. During the next 2 hours, the bulk of the day’s gains were made.

That preceded a sideways move for the next 3 hours, which was followed by a sell-off into the close that saw more than half the gains erased:

NASDAQ - Recap and Outlook for Nov 29 2016 - ONE

The intra-day chart (above) shows that the Nasdaq Composite Index was taken over by the bulls after a shaky start. But as the day went on, those bulls got tired and eventually that optimism dissipated altogether.

One of the technical reasons for the late sell-off included the fact that the MACD failed to generate a decent peak in the second half of the session. As a result, the blue trendlines, based upon the MACD peaks, dragged the index lower with its downward slope.

The trajectory of the MACD itself is bullish but it reached its own resistance level at the end of the day. It is not possible to determine a solid prediction based on the last positions of the MACD and the RSI, which are neutral.

Only the Stochastics gives me enough confidence to draw a red arrow but I should note that this decline may not necessarily occur immediately. Instead, there exists the possibility that the stochastics could move sideways for some time before falling, thus enabling the other indicators to power higher should they wish to do so tomorrow.

NASDAQ - Recap and Outlook for Nov 29 2016 - TWO

On the 5-day/5-minute candle chart (above) we can see that the Nasdaq Composite Index continues to struggle after seeing its worst performance in nearly a month on Monday.

Despite trading near all-time highs, the index is having difficulty breaking into a new range. In my last report on the Nasdaq, I mentioned that: “Since we have now fallen below two different ascending channels, you can expect both of their lower (green) lines to act as a resistance for the time being.”

I went on to say: “There does exist the possibility that we could retest these lines fairly soon, because all three of the lower indicators have potential to rise immediately from current levels (green arrows).”

Indeed, the Nasdaq did retest the green line which, until the index can break above it, will continue to act as a resistance. In fact, today’s rally paused precisely on this previously-drawn line. Because this line is the lower support of a (previous) ascending trend channel, it continues to allow for higher records for the index.

Today’s late sell-off brought the index back down to the blue trendlines, which are based upon the MACD peaks. Going forward, I expect the MACD to easily be able to rise back up towards this blue line (or perhaps even higher).

The Stochastics and RSI are both in over-sold territory and will assist the bulls with making another case for re-testing the green line (and making yet another intra-day high for the index tomorrow).

If you open a chart of the Nasdaq, which shows hourly candles, you will find that a Homing Pigeon has emerged. This bullish reversal pattern suggests erosion of the downtrend and has a medium level of reliability.

For the trailing 1-month period, the Nasdaq Composite Index has made a +3.66% return. Going back a year, it has yielded +4.92%. It was the biggest gainer of all three major U.S. averages today, which all hovered near their record highs.

The Dow Jones Industrial Average jumped +23.70 (+0.12%) higher to 19,121.60, while the S&P 500 inched +2.94 (+0.13%) higher to 2,204.66.

The longer that the S&P 500 can remain above the psychological 2,200 level, the firmer the foundation it will have from which to build additional gains upon. For the past 12 months, the index is up +5.48% and year-to-date the index is up roughly +8%.

9 out of the 11 sectors of the S&P 500 rallied today with interest rate sensitive sectors benefiting on lower U.S. yields. Real Estate (+0.63%) was the leading industry group, followed by Health Care (+0.65%) and Utilities (+0.32%). To the downside, only the Telecoms (-0.31%) and Energy (-1.15%) sectors declined.

The Nasdaq would have rallied more but the advance was limited due to a sharp drop in oil prices, which weighed on the energy shares. This comes just one day ahead of a ministerial meeting of OPEC. Despite the black commodity dragging the index down, it still managed to close positive thanks predominantly to health care stocks:

NASDAQ - Recap and Outlook for Nov 29 2016 - THREE

The Nasdaq Biotechnology Index (NBI) shown with daily candles on the 10-month chart (above) displays that the sector has had difficulty in being more than 5% positive during that timespan.

Since this sector is a significant weighting of the broader Nasdaq Composite Index (orange) I’ve included both to compare them more easily. You can see that the Nasdaq is in danger of falling because it has risen much more than bio-techs have in the past couple months.

This gap will ultimately need to be closed even if bio-techs do not fall any further. If we look at the MACD, we can see that it is starting to cross to the downside. This is very bearish and indicates that a top may be forming. The other lower indicators are already retreating.

Markets digested revisions to economic data that was better than initially expected. Third quarter GDP came in at 3.2% compared to the 3.0% that was forecasted (previously 2.9%). Likewise, the November Consumer Confidence, expected to be 101.2, came in at 107.1, while the previous 98.6 was also revised upwards to 100.8.

That is the best performance in 2 years and shows that the U.S. economy is growing quicker than people may have thought. In the coming weeks, traders will be keeping their eye on retailers for clues as to how the holiday season is turning out. Tomorrow, investors will want to know the outcome of the Bank of England stress tests.

NASDAQ - Recap and Outlook for Nov 29 2016 - FOUR

The three biggest gainers on the Nasdaq today were: Genetic Technologies Ltd. (GENE) up +$0.840 (+64.62%) higher to $2.140, Globus Maritime Ltd. (GLBS) up +$1.760 (+46.19%) higher to $5.570, and Acasti Pharma Inc. (ACST) up +$0.450 (+33.33%) higher to $1.800.

UnitedHealth Group Incorporated (NYSE:UNH) was responsible for helping to life the biotech sector. The health insurer hit an intraday high a day after the company issued a better-than-expected forecast for next year. Shares rose +$5.650 (+3.71%) higher to $157.76 today.

Another health stock on the NYSE: AbbVie Inc. (ABBV) also rose +$2.125 (+3.57%) higher to $61.585 on the back of the UnitedHealth strength.

The three biggest decliners today were: Nivalis Therapeutics Inc. (NVLS) down -$3.680 (-58.88%) lower to $2.570, Interpace Diagnostics Group Inc. (IDXG) down -$0.1239 (-41.29%) lower to $0.1762, and Active Power Inc. (ACPW) down -$0.064 (-23.63%) lower to $0.206.

PhaseRx Inc. (PZRX) crashed -$0.580 (-20.57%) lower to $2.240 after it rose +149.56% in the previous session. On the chart (above) you can see that the stock had declined a lot in the past 3 months so the recent rebound may have been justified.

Robert Patyk has 15 years’ experience trading stocks, options, commodities, futures options, & currencies. At age 17 he won first place in an international stock trading competition. Robert predicted the market crash of 2008 two years early. He is a contrarian, top-down macro trader achieving high returns by studying geo-politics, fundamentals, and technical indicators.