Regression Trends, Support and Resistance

10 ก.ย. 2020

The broader Nasdaq Composite Index had a great reversal day, but what comes next? The top 4 market cap players were testing support and resistance lines, indicating indecision on where investors think the market will go. Having one of these make a big move either direction would certainly impact the others and the broader index.

Taking a look at overall market, there is a lot of room to move downward if that's the direction that things take. Even in the shorter term of 1 year, the market is very extended beyond the Regression Trend midpoint. There's plenty of support historically, for the market to take a large correction in the other direction to bring the average growth back to the midpoint. In fact, you can see that as 35y, 5y, 2y regression midpoints converge to nearly the same location.

These regression midpoints aren't perfect, but even adding some +/- error to the locations, it still gives the market a lot of room to move down.

Outcomes could be support near the 1y midpoint where you'd also have 200d support and the pivot point of the previous peak. That would be near a 15% decline.

Beyond that, there is not much support until you get to the bottom of the March crash. So another ~15% drop would be feasible.

2020 already claims 3 of the 20 largest percentage drops in Nasdaq history.

And it's 2020 - it wants to be the best at being the worst!