Nasdaq 100: Semis and Intel Lead, Forecast Hinges on Today’s Close

Nasdaq Leads Friday but the Rally Is Thin and the Close Matters

The Nasdaq Composite Index is up around 1% at mid-session Friday and semiconductors are doing all the work. Intel soared 24% after earnings and pulled the whole chip space higher. Outside of that the market is mixed and the Dow is under pressure. This rally has a narrow base and the weekly close decides whether it holds or sends a warning signal heading into next week. Keep reading for the key levels.

Technical Outlook

Today’s trade to 24670.88 reaffirmed the uptrend in the Nasdaq Composite Index (IXIC), but there wasn’t much follow-through to the upside. Since there are no true resistance levels, we conclude that the price action suggests caution, perhaps concerns over valuation. Maybe some traders believe the market is overextended and is being carried too much by semiconductors.

Without resistance to lean on, I revert to chart patterns. The chart pattern to watch for today is the closing price reversal top. The strength of the signal will be determined by how it closes. The first is obvious, we need a lower close, but a close below the day’s mid-point and the opening will send strong signals that the selling is real. If there is a follow-through move on Monday, we’ll be looking at the start of a 2 to 3 day correction.

The key number today is Thursday’s close at 24,438.50. A close below this level sets the potentially bearish outlook in motion. Another number to watch is 24,468.48. This is last week’s close. Same pattern as the daily but expectations of a bigger correction.

Later in the session today, watch trader reaction to 24,468.48 if tested. If it starts to weaken under this level then all eyes should shift to 24,438.50.

Intel and Semis Are Carrying the Whole Market

Intel jumping 24% on earnings is the reason the Nasdaq is green today. That move lifted the entire semiconductor space and extended a run that has been the strongest story in the market all week. The problem is everything else is either flat or lower. Energy is pulling back as oil eased on Iran talk headlines. Consumer sentiment is still weak. The Dow is under pressure. When one sector is doing this much work the rally is one earnings miss or one bad headline away from losing its engine.

Narrow Leadership Is the Real Story

Earlier in this cycle multiple tech names were contributing. Now it’s mainly semiconductors. That concentration puts enormous pressure on this group to keep delivering and the bar keeps getting higher. Intel cleared it Friday. The question heading into next week is who clears it next and whether the rest of the market can offer any support if semis take a breather.

What to Watch Into the Close

The close is everything today. A finish below 24,438.50 puts a daily closing price reversal top on the chart. A finish below 24,468.48 adds a weekly reversal on top of it. Both on the same day sends a signal that traders around the world will be looking at over the weekend. Intel bought the bulls time Friday morning. Whether semis can hold their gains into the bell decides how Monday opens.

More Information in our Economic Calendar.