If It's Up Then It's Stuck

On April 5th we published an article “Believe What You See”, extolling our bullish case for the Nasdaq and its derivative the QQQs (102 cap-weighted stocks, dominated by technology, i.e., Microsoft, Nvidia, Amazon, etc.).  That day saw a close of 315.92 in the QQQs.  Two months later, we sit today with a close of 355.16.  Not much to explain here.

    The main premise of Technical Analysis is very closely related to Newton’s Law of Motion: a thing will remain in motion unless compelled to change its state by the action of an external force.  In technical analysis, we say that a trend in motion will remain in motion until it gives signs of reversing.  Not necessarily ground-breaking, but it’s confounding how many investors just cannot grasp this, even some technicians. 

    Year-to-date, the QQQs are up over 33%.  What’s so bearish about that?  An uptrend in motion, which this is, should hypothetically stay in motion until it gives signs of reversing; and I haven’t seen any signs of a reversal yet.

    Seasonality is a hidden factor that I don’t believe investors are taking into consideration, and depending on the year, some cycles can be more powerful than even some of the worst news producers can spread.  Pre-election years are historically bullish tides that rise all boats.  So despite the storm on Wall Street, with the banks, the debt ceiling, and whatever else they’ll conjure up this year, the tide, which determines levels much more than the weather, is silently lifting the markets right before everybody’s very eyes.  The thing of it is, it’s going mostly unnoticed as people gaze into the distance for the impending storm.

    I’ll be the first to admit: this rally has been breathtaking.  33% in 5 months is nothing to sneeze at.  Some traders are booking profits and calling it a year already, and if you’ve made or exceeded your goals, congratulations.  But if you’re still riding the wave as I am, or as the great Tom Basso says, "Enjoying the Ride", here are some logical points to pay attention to.

    After blowing through the $330 range (honestly as expected), the next realistic profit objective is the $370 zone.  There we have an area that has been tested 17 times on a weekly basis over the course of 2 years.  Trendlines, even horizontal ones, are made more significant by how long they are in play, and how often they’ve been interacted with by price.  This area has all the characteristics of a valid trendline.  Fittingly, this is where we can expect some activity.

    The next but not last profit objective is a retest of all-time highs.  The final profit target remains above here; fear of missing out, a friendly stance from the white house, and the possibility of interest rate cuts make the possibility of this being a record year despite the overtly bearish tones blaring from our devices.

    We’ve been bullish since October 2022, and with overhead resistance nearly 5% above today's price, we have no reason to doubt our own eyes.