Searching For Resistance
When almost every market everywhere seems to be breaking out into new all-time highs, that's a strong bullish sign!
But with so many markets in uncharted territory, it makes it hard for the technical analyst to know just how far a rally might run. Where will the next level of resistance be that results in a significant pull-back?
Right now there are still two key markets that are way below their all-time highs. Can we use these to identify likely stalling points for the current stock market bull runs? Let's take a closer look:
* NASDAQ 100 (NDX) has rallied from a 2002 low of 794 to near 2030 - but it is still well below its record year 2000 high near 4800.
* NI225 - Nikkei 225 Index, Japan - is sitting at 18,220, less than half of its all-time high set way back in 1989 at 38,957.
Starting with the Nikkei 225, the next strong resistance band should be in the 19,500 - 21,000 range, with any push over 20,000 likely to be brief and lead to a strong pull-back.
If NI225 is to retrace 50% of its 14 year decline, it will eventually carry to 23280, but 20,000 - 21,000 is likely to provide an insurmountable hurdle on the first attempt.
NDX has strong resistance close at hand, near 2080. If it manages to navigate through that, the top of its trading channel sits near 2191.
So the answer to where the next level of resistance lies may be as close as +2.5% (NDX) or as far as +9.8% (NI225) - the point is that no market climbs higher in a straight line, even when in new territory, so these are two points where we should be on high alert.
Murray Nickel is a mathematician, statistician, and professional trader. He offers a free trial of trading signals for global market indexes and index ETFs, spot Forex, and spot Gold. He also mentors traders aiming to succeed at trading global markets.
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