It seems that stock markets around the world are all breaking out to new highs at the same time, in what surely must be a strong bullish sign!
Technical analysts often use previous support level as resistance, or use channels to project resistance points. But with so many markets in blue sky territory at what point will clouds form on the horizon? Is the next major pull-back close at hand, or a long way off ... or maybe both?
Luckily there are two well-known key markets that remain well below their all-time highs and may contain some hints at where the next level of resistance lies that could lead to a pull-back. They are:
* NASDAQ 100 (NDX) is sitting near 2030 - well below its all-time high near 4800.
* The Japan market reminds us how very long-term a slide from great heights can be (take note re NASDAQ 100). The NI225 - Nikkei 225 Index - peaked way back in 1989 at 38,957 before sliding for fourteen years to a low of 7604 in 2003. At 18,220 today it is over double the low point, but still less than halfway back to that record high set so many years ago.
Starting with the Nikkei 225, the next strong resistance band should be in the 19,500 - 21,000 range, with any push over 20,000 likely to be brief and lead to a strong pull-back.
If NI225 is to retrace 50% of its 14 year decline, it will eventually carry to 23280, but 20,000 - 21,000 is likely to provide an insurmountable hurdle on the first attempt.
NDX has strong resistance close at hand, near 2080. If it manages to navigate through that, the top of its trading channel sits near 2191.
So the answer to where the next level of resistance lies may be as close as +2.5% (NDX) or as far as +9.8% (NI225) - the point is that no market climbs higher in a straight line, even when in new territory, so these are two points where we should be on high alert.
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Murray Nickel is a mathematician, statistician, and professional trend trader. He offers a free trial of trading signals for global market indexes and index ETFs, spot Forex, and spot Gold. He also mentors traders aiming to succeed at trading global markets.
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