Weekly Market Outlook – You Can’t Fight The Tape...Until You Can

The S&P 500 isn't the only index waving red flags though. While the Nasdaq Composite logged a 1.1% gain, each day's gain was weaker than the prior day's gain. The arching nature of the recent daily highs says the advance is losing steam, and like the S&P 500's Volatility Index, the Nasdaq's Volatility Index (VXN) looks bullish by virtue of its move below the floor at 25.4 (orange, dashed). But, it's alarmingly near its more absolute floor around 14.0.

Nasdaq Composite Daily Chart, with VXN

Source: TradeNavigator

You can also just tell with a passing glance at the daily Nasdaq chart that its momentum has been slowing since the middle of last year. The composite currently lies just 15.6% above its 200-day moving average line (green), which is a big divergence, but not as big as the 25% divergence seen in mid-February.

Here's the weekly chart of the Nasdaq, just for added perspective. Overbought or not, you have to like the way the composited pushed up and off of the 100-day moving average line (gray) a month ago (highlighted).

Nasdaq Composite Weekly Chart, with VXN

Source: TradeNavigator

Don't read too much into last week's action, bullish or bearish. Friday was an option expiration day, which can skew stocks, and certainly skews the volatility indices. Regardless, we're starting this week out where we ended last week. That's overbought and vulnerable to some selling.

Just because we're due, however, doesn't mean it's going to happen. Until any weakness actually breaks the index's key support lines - and the 100-day moving average lines in particular - the bulls need not sweat.

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