Does the Nasdaq Rally Continue?

Looking back at the Nasdaq 100 continuous futures contract from its trough in October 2022 to its recent peak in December 2023, it has rallied 63%. During this period, this market has seen 3 significant retracements. The first starting in December 2022, the second starting in January 2023, and the third starting in July 2023. This latest one was the largest and longest of the three. Since bottoming out in late October, this market has rallied 21%. Is this latest rally sustainable? I think the odds favor additional gains IF we see the market correct a bit from current or slightly higher levels. Why? Let’s look at some technical analysis to support it.

First, what might stall this current rally?

There’s potential resistance from current levels up to 17333 based on 2021 highs, a 161-fib extension, and a monthly R2 pivot. The 2021 highs at 16767.50 might provide the biggest challenge and prevent prices from rising too much more without a retracement. Additionally, the bond market (10yr, 30yr futures) is trading at potential resistance levels based off prior weekly retracements and volume profile ledges. If the recent rally in bond prices (lowering interest rates) stalls, then that could ignite a selloff in the Nasdaq.

Second, what happens if the current rally does stall?

I think there’s loads of potential lower support that could provide low risk, high reward trades to the long side. The area I’m currently most focused on, but could change depending on market conditions, is between 16100 and 15606. This area contains a tight cluster of three prior weekly retracements, a tight cluster of two prior daily retracements, a rising window or gap that needs to be filled, a change of polarity (old resistance becoming new support), the 34 EMA wave, the 55 EMA, and a volume profile ledge. All these factors combine to form a potential strong level of downside support. Furthermore, a dominant ABCD pattern has formed on the weekly chart with a super shallow retracement and right skewing. This signals a bullish up trend with upside momentum. The on-balance volume indicators also show bullishness for this rally on both the weekly and daily charts.

Lastly, where can this rally go from here?

Regardless of if prices stall here, go a bit higher and stall, or just continue higher, the long-term minimum target zone based of the weekly ABCD pattern is 19173.36 to 19718.25. I expect prices to reach this zone before going below 14140.25 (ABCD pattern’s failure point). Keep an eye on this market as it’s sure to stay interesting in the upcoming months.