Nasdaq 100 Mar 05 to Mar 09 Outlook
Similar to prior weeks, the initial weaknesses from the gap down on monday resulted in quick rejection to even tagging Y-1. That set the stage to break Y+1 quickly. NQ did not stop until Y+3 was tagged. Closed the week above Y+2.
As mentioned last week, without a catalyst you cannot move NQ anywhere. So last week we got rumors on Apple that it will introduce new product(s) this coming week. Many speculate that it will be iPad3. The rumor alone sending Apple flying.
Due to the fact that Apple is the largest weighting stock in NDX, the strength in Apple has completely masked out the negativity in all the rest of the components in the index, forcing it to go higher. That in turn short squeezed the other components to go higher later in the week.
If you do not have position(s) on the wrong side (i.e. short), this week is very funny indeed – a perfect showcase why the index calculation method is designed to favour going higher easily.
Only during the dotcom bubble did NDX run up with just 4 stocks carrying the weight. This time, it is one and only one stock, Apple.
Such parabolic moves do not last. It is not time to fade the top because it is not possible to tell if the move would end. However, it is wise to light up on QQQ or other NDX based ETFs.
We will find out if this move would end or continue after Apple made its presentation of its new products.