3 Bullish vs 1 Bearish Case

A little profit taking was expected last week and little profit taking is what we got. Now, the NASDAQ is between guardrails at 13,300 and 13,844.  The bottom overlaps horizontal and rising support connecting bottoms dating back to early March. The 50-day moving average of 12,991 adds a third layer of support just a touch below the ascending trendline.

A three to one ratio of potential downside protection versus one level of resistance should favor bulls. At the minimum, investors might have a few exit points if things turn sour. Although we believe bulls have the upper hand under current conditions, we wait for the market to declare a winner before picking sides.

Investors might consider pulling the trigger on adding money to stocks if the NASDAQ closes above 13,900. A bullish move higher might send the NASDAQ to the 14,750 area code in the near to intermediate term. If the NASDAQ falls through 50-day support, then 12,250 should provide firm technical footing to the downside.

In our opinion, the odds are tilted 70/30 toward the bullish scenario. Index investors might consider Invesco QQQ Trust (QQQ) if/when the NASDAQ tops 13,900 for the day. If downside proves to be the correct call, then ProShares Short QQQ (PSQ) might make sense if the NASDAQ’s 50-day mark cannot hold.


For the third week in a row, QQQ outperformed SPDR S&P 500 ETF Trust (SPY). We like it when the NASDAQ is the lead dog, and it adds weight to our opinion that stocks are more likely to breakout than breakdown.

Interest rate sensitive sectors and industries performed the best last week.  ETFMG Alternative Harvest ETF (MJ) and SPDR S&P Oil & Gas Equipment & Services ETF (XES) were by far the two biggest winners, gaining 7.02 and 6.95 percent respectively. Banking, Real Estate, and Insurance ETFs combined for five of the top 10 spots.

MJ could have plenty of upside, but most of the weed ETF’s breakout signals proved to be false since early 2021. Investors that want to take a flyer on the possibility of MJ moving higher might consider cutting losses if the fund closes below its 52-week low of $2.91. It trades at $3.18 as of this keystroke.


Investors interested in MJ would likely be best served holding the diversified ETF versus any of its top holdings. Once again, we feel the best course of action would be to add to leadership tech stock holdings if/when the NASDAQ makes its way above 13,900 on the close.

It’s our expectation that the NASDAQ will likely make its decisive move by the time we get together again this time next week. But, as always, we’ll wait for the answer before taking action.

Rich Meyers