Nasdaq Faces Potential Weakness Before Christmas: Key Levels to Watch

Key Points:

• Nasdaq up over 5% in December and 43% for 2023, nearing its best year since 2020.
• Recent performance shows caution as the index approaches yesterday’s close.
• Potential consolidation or reversal signals amid record highs.
• Key support levels to monitor: 16,750 and 16,400.

As December progresses, the Nasdaq has surged over 5% and is on track for a remarkable 43% gain in 2023, marking its best year since 2020. Despite this impressive performance, recent trading patterns suggest caution. The Nasdaq 100 recently hit a new record high of 16,830 but is now approaching yesterday’s close, which could indicate a period of consolidation or potential reversal.

The recent streak of ten consecutive days of gains for US stocks, including the Nasdaq, has seen a modest recovery from initial losses. This upward trend has been supported by expectations of a Federal Reserve interest rate cut next year and positive economic data, such as unexpectedly rising existing home sales and a significant increase in consumer confidence.

Currently, the NAS100 trades above both the 200-day and 50-day moving averages, signaling a bullish trend. However, its proximity to the previous close raises concerns. Short-term weakness could target key support levels at 16,750 and 16,400, the latter being a consolidation point at the beginning of December before the recent upward movement.

Traders should remain vigilant for potential signs of consolidation or a reversal as the Nasdaq approaches these critical levels.