Breadth breakdown leaves Nasdaq bulls on alert
QQQ•Megacap support may not be enough
While a small group of megacap stocks can cushion the Nasdaq for a time (the Roundhill Magnificent Seven ETF MAGS.K is up 2.7% since August 14), sustained advances typically require broader support from the rest of the market. Right now, that broader participation is notably absent.
There is, however, a potential silver lining for the bulls.
The NH/NL Index is approaching a support line drawn from its April 2025 low, which now sits near 22%. The indicator also bottomed at 17.6% on March 31, just one trading day after the Nasdaq reached its low during the late-March market selloff.
That history has some investors looking for another washout-style low that could set the stage for a V-shaped recovery and a revival in market breadth.
If that support area gives way, however, it would suggest internal weakness is intensifying. For perspective, the NH/NL Index ultimately bottomed at just 7.8% during the April 2025 selloff.
For now, Nasdaq bulls can take comfort in support holding on the price chart. But with yields rising and market participation continuing to narrow, the durability of that support may soon be put to the test.
Nasdaq holds support as breadth weakens
The Nasdaq Composite .IXIC managed to hold an important support area on Monday, but the picture remains murky. Ahead of Tuesday's open, E-mini Nasdaq 100 futures NQc1 are roughly flat, offering few clues about whether the index is ready to rebound or face another test of support.
The bigger concern may be what's happening beneath the surface. Although the Nasdaq has traded in a narrow range over the past month and is only 3.4% below its June 2 record closing high, one breadth measure has continued to weaken, creating a growing divergence between price and participation.
The Nasdaq New High/New Low (NH/NL) Index has fallen to 23.8%, its lowest reading since April 2.
