Low Trading Volume May Hint at Weakness

Nasdaq 100 Price Outlook:

Nasdaq 100 Forecast: Low Trading Volume May Hint at Weakness

Stocks started the week off confidently with each of the S&P 500, Dow Jones and Nasdaq 100 posting gains of more than 3%. Encouragingly, volatility continued to recede relative to recent weeks as the VIX fell another -8.6 points. Still, investor uncertainty remains elevated and trading volume on the S&P 500 and Nasdaq 100 has begun to slow – a potential sign of waning conviction.

Nasdaq 100 Price Chart: Daily Time Frame (July 2018 – March 2020)

To be sure, a decline in volume is unsurprising given the extremes witnessed throughout February and March. Nevertheless, trading volume on the Nasdaq 100 clocked in at its lowest level since February 20 which marked the first day of selling in the subsequent stock market crash.

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Consequently, volume has returned to pre-crash levels but the VIX remains comfortably above historical averages. Against an alarmingly uncertain fundamental backdrop, a decline in volume while volatility runs rampant likely speaks more to waning confidence than a complete return to normalcy.

With that in mind, it seems the Nasdaq 100 remains vulnerable and may require assistance from support around the 7,500 level in the days ahead. Secondary support may reside near 6,990 with the recent bottom at 6,645 serving as the “line in the sand” standing in the way of a deeper retracement.

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On the other hand, robust volume with bullish price action would be an encouraging development for the tech-heavy index and could speak to a lingering appetite for further gains. Should price continue higher, initial resistance may reside slightly above 8,000, but only after the Nasdaq can surmount the 7,915 level which has stalled price action in recent days. In the meantime, follow @PeterHanksFXon Twitter for updates and analysis.

–Written by Peter Hanks, Junior Analyst for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

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