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James Hyerczyk

The cash market NASDAQ Composite broke above 13,000 for the first time on Thursday while the March E-mini NASDAQ-100 Index hovered just below its record high set on January 4. The rallies were fueled partly by gains in shares of Microsoft and Alphabet which gained more than 2%. Shares of Apple jumped more than 3.1%.

Technology stocks opened firm following yesterday’s sharp sell-off, but soared after sentiment on Wall Street got a boost after the Institute for Supply Management (ISM) said its index for nonmanufacturing activity in the U.S. rose to 57.2 in December from 55.9 in November. Economists polled by Dow Jones had forecast a print of 54.5.

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At 20:28 GMT, March E-mini NASDAQ-100 Index futures are trading 12945.75, up 329.00 or +2.61%.

In stock related news, electric-car maker Tesla Inc jumped 4.2% to a record open after RBC Capital Markets upgraded its stock rating to “sector perform”.

In economic news, the number of Americans filing for jobless benefits unexpectedly dipped last week, while staying extremely high, a Labor Department report showed, with the job market recovery appearing to stall as COVID-19 threatens to overwhelm the country. The price action indicates that investors shrugged off the news.

Daily March E-mini NASDAQ-100 Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 12959.75 will signal a resumption of the uptrend. A move through this level will also make 12491.25 the new main bottom. Taking out this level along with 12461.00 will change the main trend to down.

The minor range is 12959.75 to 12491.25. Its 50% level at 12725.50 is the first support. The second support level is 12588.25. This levels will move up as prices move higher.


Short-term Outlook

Other than the top at 12959.75, there is no resistance, which means we should continue to watch for a chart pattern like a closing price reversal top to signal weakness. Taking out a main swing bottom will be the next sign that the selling is greater than the buying at current price levels.

I mention this because we’ve hit the point in terms of price and time where we should start worrying about the downside. Not so much that we consider a counter-trend short, but rather moves to protect capital like trailing stops and of course watching for the dramatic closing price reversal top.

Catching a good short is going to be difficult, but trying to pick a top by selling rallies is proving to be even harder. Trying to pick a top actually fuels the upside momentum because someone has to sell to the buyers.

I think valuations are going to become an issue at some point in the near future. Fear and uncertainty will be other reasons for a correction. While we’re not turning bearish on the market, we do think stocks are a bit pricey and would like to see them return to value areas over the near-term.  The nearest value area on the chart at this time is 11948.00 to 11709.25.

For a look at all of today’s economic events, check out our economic calendar.

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