E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – Buyers Taking Earlier Breather Ahead of Initial Claims

September E-mini NASDAQ-100 Index futures are trading flat early Thursday as investors may be taking a short-term break after posting robust gains the first two days of the month. We could also be seeing some light profit-taking and position-paring ahead of Friday’s U.S. Non-Farm Payrolls report and the start of the long Labor Day weekend.

At 04:15 GMT, September E-mini NASDAQ-100 Index futures are trading 12384.25, down 27.25 or -0.22%. On Wednesday, the index touched another record high at 12465.25.

Although high-flying names like Apple and Tesla fell 2% and 5.8%, respectively, their Wednesday losses only curb significant year-to-date gains for each stock. Still, not all tech names underperformed:  Semiconductor stocks like Nvidia and Intel rose 3.8% and 2.8%. The VanEck Vectors Semiconductors ETF rose 2.6%.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 12465.25 will signal a resumption of the uptrend. The main trend will change to down on a trade through the nearest main bottom at 10845.50. This is highly unlikely, however, the prolonged move up in terms of price and time has put the index inside the window of time for a closing price reversal top.

A closing price reversal top is a potentially bearish chart pattern. It doesn’t change the trend but often signals that the selling is greater than the buying at current price levels. Most of the time, it triggers a 2 to 3 day break or a 50% to 61.8% correction of the last rally.

The minor trend is also up. A trade through 11221.50 will change the minor trend to down. This will shift momentum to the downside.

The minor range is 11221.50 to 12465.50. Its 50% level at 11843.25 is the first downside target. This level will move up if buyers take out yesterday’s high.

The main range is 10845.50 to 12465.25. Its 50% level at 11655.25 is the second downside target. This level will also move up if there is a new high.

Short-Term Outlook

I wouldn’t recommend selling into rallies in an effort to catch a top or “The Top”. You’re actually feeding the rally because investors have to buy from someone selling.

If you think the market is overextended then the best way to pick a top is to look for a sign of a shift in momentum. It could be an intraday “M” top formation or a closing price reversal top. On the daily chart, it could be as simple as taking out the previous day’s low and forming a new minor top, or as complex as a higher-high, lower-close, close below the opening or a close below the mid-point of the day’s trading range.

P.S. – Only pick a top if you see an exit first. Otherwise, you will be the exit for someone else doing the same thing.