LIVE MARKETS Nasdaq Composite: Coyote Wily looks more like a bear

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NASDAQ COMPOSITE: WILY COYOTE LOOKS MORE LIKE A BEAR (0900 EST/1400 GMT)

The Nasdaq Composite (.IXIC) ended Thursday down nearly 12% from its record close on Nov. 19. And although it’s only the early days of 2022, IXIC’s 9.5% decline so far puts it on track for its biggest annual decline since 2008.

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To note, on a daily basis, the IXIC ended Thursday at its most oversold level since the panic of February/March 2020 Read more:

IXIC01212021

Therefore, the composite looks ripe to rebound at any time. However, traders will assess the structure and character of any rally, as sudden strength could simply turn out to be a reaction to help ease the oversold condition, in what will always turn out to be a continuing downtrend.

For example, during the August/December 2018 and February/March 2020 busts, the largest oversold readings on a daily basis occurred in the early stages of the decline. It was only when the IXIC made new lows, accompanied by a convergence of bullish momentum, that true lows were then found.

Meanwhile, a number of internal Nasdaq metrics are once again particularly weak. The Nasdaq New High/New Low (NH/NL) index fell 16.1% – click here: read more. The Nasdaq McClellan Summation (McSum) plunged to -5,276 – click here: read more. The Nasdaq’s weekly advance/decline (A/D) ratio is 0.79. These metrics have yet to stabilize, but have the potential to hit washed-out levels at any time.

That said, when looking at the annual Bollinger Band (BB) chart of the composite, the downside still seems to be looming. The IXIC still needs to fall to at least 13,645 to get back below the upper yearly band. Click here: find out more

At this level, the composite index would be down 15% from its record close. And if its nine-year streak of annual closes above the annual top BB is to end, 2022 will likely see some venerable roadrunners, like tech (.SPLRCT), chips (.SOX) and FANG (.NYFANG), turn out to be killed on the road.

(Terence Gabriel)

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Terence Gabriel is a market analyst at Reuters. Opinions expressed are his own.

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