More Downside Ahead For The NASDAQ Composite

sellbuyMorpheus Trading: In yesterday morning’s commentary, we warned the NASDAQ was imminently headed for a significant correction and that it was time to exit long positions and/or trail very tight stops.

Our warning signals turned out to be rather timely, as the NASDAQ plummeted 1.9% on heavy volume and sliced through support of its 20-day exponential moving average thereafter.

On the weekly chart below, notice that yesterday’s selloff caused the NASDAQ to slide back below the upper channel trendline we recently discussed, and the index is likely headed down to its 10-week moving average (roughly the same as 50-day moving average) within the next few days:

NASDAQ weekly uptrend line

For many investors, the Dow Jones breakout to new highs on Wednesday (two days ago) was a bullish sign. If so, then Thursday’s selloff was an extremely ugly reaction to new highs, as the Dow printed a bearish engulfing candlestick on higher volume:

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