From the October 01, 2009 issue of Futures Magazine • Subscribe!

Nasdaq 100 soars

Since its March lows, the E-mini Nasdaq 100 has climbed more than 600 points, reaching nearly 1700 in early September. The index tested, but did not take out, the lows from the previous November unlike other major indexes. More importantly, the Nasdaq 100 has led this year’s equity resurgence, not only outperforming other indexes but proving to be the best indicator for equities in general.

Analysts are watching revenues of components in the index closely. “A portion of the tech companies do have good cash reserves but there are concerns regarding financing,” says Richard Roscelli, a broker at Whitehall Investment Management. “There are concerns regarding the default rate on higher yielding corporate bonds. They’re up over 300% from last year. That could put pressure on a lot of the companies in this index.”

In early September the index crossed the technically important 50% retracement level of the move from the 2007 high to last year’s lows, while the Dow and S&P crossed the 38% retracement level. “It’s looking pretty overbought,” Roscelli says. “We should pull back to 1630 by mid-October. It doesn’t have the violent downward pressure of the S&P because of all of the financials in it, but there are some definite headwinds.”

Wherever those headwinds blow, the NQ probably will be reacting to them first, so it should be watched closely.

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