I am writing this at 330PM EST, so please bear with me if the levels I address in this note don’t hold on the close. Closing prices are what matter most in our macro models…
Unlike Friday’s fresh new high for the Dow, the YTD closing high for the Nasdaq still dates back to the one made on September 22 at 2146. This morning, alongside a breakout to new YTD highs for the SP500 (which continue to hold up here), the Nasdaq had what some quants who measure price momentum call an Outside Reversal.
An Outside Reversal is what you see in the chart below - an intraday breakout to new YTD highs, followed by an intraday reversal (selloff), and a market closing price that sits below the prior YTD closing high.
After we saw the Outside Reversal in the SP500 a few weeks back, you saw what happened. The SP500 corrected by over 4% in the days that followed that reversal. I have no support for the Nasdaq between here and 2096. It would be healthy to see the Nasdaq correct to that line and recover again. After all, it is up +36% YTD.
This is an intraday risk management factor that is worth taking the time to point out.
Keith R. McCullough
Chief Executive Officer