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Searching For Resistance
Emerging markets around the world have pushed to higher and higher record levels. They're now being joined by their more mature cousins - such as DJI, S&P 500, and DAX.
Emerging markets around the world have pushed to higher and higher record levels. They’re now being joined by their more mature cousins - such as DJI, S&P 500, and DAX.
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.
* The Japan market reminds us how very long-term a slide from great heights can be (take note re NASDAQ 100). The NI225 - Nikkei 225 Index - peaked way back in 1989 at 38,957 before sliding for fourteen years to a low of 7604 in 2003. At 18,220 today it is over double the low point, but still less than halfway back to that record high set so many years ago.
Looking at NI225 first, it could easily push another 10% higher, but should face a major wall of resistance in the 19,500 - 21,000 range and this could well form the range for a long-term high.
That slide from a high of 38,957 to a low of 7604 will be 50% retraced at 23280. So after a serious pull-back from the 19,500 - 21,000 range, a further push to over 23,000 is possible - just don’t expect to get there in a straight line!
For NDX, the next resistance band is in the 2080 - 2191 range, and if it eventually reclaims 50% of the lost territory it will ultimately push to near 2800 - about 38% above todays level.
So be prepared for the rally to falter as NI225 approaches 20,000 and/or NDX gains another 50 points to near 2080.