Nasdaq at Fresh Highs — So Why I'm Preparing for a Correction
Nasdaq at Fresh Highs — So Why I'm Preparing for a Correction
Technically, the Nasdaq looks phenomenal on the daily timeframe. It barely tested any major support, found one very quickly after just three days down, then rocketed right back to fresh highs. Whether it's the S&P 500 or the Nasdaq, these are about as clear as uptrends get.
This is a tape that's very hard to fight, and I'm not a fan of trying to do so. But at the same time, a clean trend doesn't guarantee it continues forever.
Why the odds of a correction are building
Here's the core point: the market is increasingly exposed to a correction — either in time, meaning we go sideways, or a pullback to longer-term support. It's been quite a while since we retested the 50-day moving average, let alone the 100- or 200-day.
It's not record-setting in terms of how long the run has lasted, but what matters is that the good news is largely out and most of the big earnings-season catalysts are now behind us. There's simply less fresh fuel to push the tape higher.
The most likely scenario is a range
From my view, the most likely scenario isn't a sharp crash. It's stocks entering a range and trading sideways for a couple of months as we head into the midterm election cycle. That's a time correction.
The distinction matters: a grinding, sideways range, not a plunge. Even if price doesn't drop much, a correction that works off the froth through time is still a correction. It's boring for trend followers but painful for anyone who aggressively chased the highs.
What this means for positioning
The trend is your friend. But the cleaner the uptrend, the stronger the temptation to chase. Rather than blindly chasing breakouts to new highs, I'd rather wait for a sideways or pullback phase to let longer-term support offer a better entry.
And remember: the more the market relaxes into a "everything's fine now" mood on external risks like the Middle East, the sharper the drop can be if the scenario doesn't play out perfectly.
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