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NASDAQ Composite statistical and technical analysis

The number of NASDAQ companies that have fallen by more than 50% from one-year highs is extreme compared to historical data. Is something bigger coming? The current price of NASDAQ Composite is 15 614 (January 11, 2021). Let’s now look at statistical and technical analysis.

Based on a long-term analysis of historical data, the average positive and negative daily returns are approximately 0.96% and -1.05% , respectively. The estimated daily return in both directions based on their probability of occurrence is 0.53% and -0.47% . Yesterday´s return was 0.14% , well below the first standard deviation. Our scoring is currently negative (-1 ) for the month-on-month change and -1 for price indexation. Both scorings range from -3 up to 3 , which means that we estimate a slightly negative phase of the cycle. The development of the estimated cycles based on our analytical system is shown in the following chart.

NASDAQ daily price indexation Source: WALFIR

Different moving averages (MAs) help us better identify trends across multiple time frames. We use 3 basic MAs to find out which sentiment dominates each horizon. The purple line represents the monthly , the green line the 6 months and the yellow line the annual moving average. According to the short-term MA, the NASDAQ is in a bearish sentiment, as it fell below last week. However, longer MAs still support bulls, which can be clearly seen in the medium-term moving average.

NASDAQ daily price development Source: WALFIR

In the last quarter of 2021, we witnessed more upward trends, with the maximum level reaching 9 consecutive days, which is almost the maximum increase (10 days) in the measured period of 3 years. The downward trends in recent months have not exceeded more than 3 days. However, the maximum for the last 3 years is 5 days. We could use the average long-term ATR (Average True Range) obtained from daily data (1.51% ) to estimate Stop Loss orders for our positions. The current value is 2.44% , which is more than average. Approximately 90% confidence interval (return between -2.40% and 2.40% ) is shown in the histogram below by a red rectangle.

NASDAQ daily return distribution Source: WALFIR

We could use the last decile of low to high returns (2.80% ) to estimate Profit Targets, as shown in the chart below.

NASDAQ daily low to high distribution Source: WALFIR

Basic technical analysis still supports bullish sentiment as the market price creates higher highs and higher lows. The decline in recent days is nothing extra compared to the price development since the beginning of 2020. NASDAQ is currently located near the demand zone (green rectangle), where there are also the psychological level of 15 000 and the long-term moving average. The divergence between price development and RSI also supports the bullish scenario. Therefore, we could see an upward pullback before another potential decline.

NASDAQ daily technical analysis Source: TradingView

WALFIR Technologies is one of the three divisions of WALFIR s.r.o., which is based in Slovakia. The primary interests of this division are analytical, quantitative, and algorithmic...


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