The Nasdaq 100 Silver Cross Index (SCI) shows the percentage of NDX stocks with the 20EMA above the 50EMA (an IT Trend Model BUY signal). The current reading is 56%, which is pretty weak, so we must wonder if it will go lower, or if it is about to improve. To answer that question we look at the bottom two panels on the chart, which show the percentage of stocks above their 20EMA and 50EMA. Their readings are 41% and 45% respectively, which is bearish. Let's look at why that is.
Exponential moving averages (EMAs) always move toward price, so if price is above the EMA, the EMA will be moving up, and vice versa. In this case, price is below the 20EMA on 15 of the 44 stocks that still have a Silver Cross. This is pulling the 20EMA down, closer to the 50EMA and a potential downside crossover. However, the 20EMA can't cross down through the 50EMA unless price is also below the 50EMA, and currently price is below the 50EMA on only 11 of the stocks 44 which still have a Silver Cross. This is still a negative picture.
One of those stocks is Apple (AAPL), so let's look at that chart for clarification. Currently AAPL is below its 20EMA and 50EMA, and, unless it moves sharply back above those EMAs, a downside crossover will probably take place today or tomorrow.
CONCLUSION: We can't know the future, but the Nasdaq 100, a premier blue chip market index, is showing considerable weakness and is poised to get even weaker in the days ahead.
Click here to register in advance for the recurring free DecisionPoint Trading Room! Recordings are available!
Technical Analysis is a windsock, not a crystal ball.
Helpful DecisionPoint Links:
DecisionPoint is not a registered investment advisor. Investment and trading decisions are solely your responsibility. DecisionPoint newsletters, blogs or website materials should NOT be interpreted as a recommendation or solicitation to buy or sell any security or to take any specific action.