Remarkably, the Nasdaq 100 managed to fall 10%+ over the last three trading days and still close above its 50-day moving average! This data point highlights just how extended into overbought territory that the index was leading up to its recent drop. The only other times the index has seen a 3-day drop of 10%+ and still closed above its 50-DMA were on January 6th, 2000 and May 30th, 2001. Following the January 2000 occurrence, the index bounced back sharply over the next month (+21.6%), but ultimately peaked in March of that year and went on to enter an extended bear market. The May 2001 occurrence also saw a big bounce-back of 7% over the next week, but that was right in the middle of the bear market and the index rolled over by 14% over the next three months.
As shown below, the Nasdaq 100 has closed above its 50-day moving average for the last 103 trading days. There have only been nine prior streaks of 100+ days above the 50-DMA in the index’s history dating back to 1985. The 50-DMA will eventually break and the streak will come to an end, and in today’s Chart of the Day, we highlight how the Nasdaq performed in the days and weeks following the break below support at the 50-DMA. We also highlight how the index performed in the days and weeks following prior three-day drops of 10%+. If you’re wondering what history has shown following past moves that are similar to what we’ve just seen for the Nasdaq, today’s Chart of the Day is a helpful read. You can access the report with a two-week free trial to any of our three premium membership levels. CLICK HERE to start your free trial now.