Markets

NASDAQ (NDX) At Yearly High: Bitcoin (BTC) Bullish Correlation?

Yesterday’s close of the Nasdaq (NDX), the largest index of technology companies (NDX), was very bullish. Not only did the index break above long-term resistance levels, but it also reached its highest value in over a year.

The Nasdaq index remains in a long-term positive correlation with the Bitcoin (BTC) price. However, this correlation has weakened for several days and is currently negative on the daily time frame.

Despite these divergent trends, could this be a bullish sign for the cryptocurrency market?

What is NASDAQ?

The Nasdaq 100 Index (NDX) is a measure of the health of modern industry and innovation. Along with the Dow Jones Industrial Average and the Standard & Poor’s 500, it is one of the most widely followed stock market indexes in the United States.

The Nasdaq-100 index consists of the 100 largest technology companies listed on the NASDAQ (National Association of Automated Quotations for Securities Dealers).

The entire exchange tracks the performance of more than 2,500 assets, but about 90% of its movement is expressed by NDX.

The Nasdaq 100 is a capital weighted index. Stock weights in the index depend on their market capitalization, with some rules limiting the influence of the larger components.

NDX vs. SPX/ Source: nasdaq.com

Unlike the S&P 500 (SPX), which tracks the performance of the 500 largest companies in the United States, the NDX is limited to the high technology and innovation sector.

Nasdaq breaches its highest level in one year

Like Bitcoin and the broader cryptocurrency market, the Nasdaq has been in an uptrend since early 2023. After bottoming out at 10440, the NDX created a triple bottom pattern in October-December 2022 (blue arrows).

After that, an upward trend began, which continues to this day. The first signal of a bullish trend reversal was the break above the descending (black) resistance line, which was located from the all-time high (ATH) at 16,765 on November 22, 2021.

After that, the NDX paused at the 12750 (green) area, which corresponds to the 0.382 Fibonacci retracement level, which measures the complete drop of 38% of ATH.

This is a frequent area for the end of corrective movements. Its breakout, which occurred in March 2023, indicates that the Nasdaq has started a new bullish trend, rather than just correcting the long-term downtrend.

Moreover, this level was confirmed as support in late April (green arrow). This event started another wave of bullish movement, which led to yesterday’s break above another important resistance level at 0.5 Fib (Red).

Since the beginning of January 2023, the NDX has increased by more than 29%.

Nasdaq Price Chart (NDX)
NDX by TradingView

If the uptrend continues, the next resistances will be at 14,360 and 15,425, corresponding to Fibonacci levels 0.618 and 0.786. On the other hand, rejection from current levels could lead to a bullish retest of the previous breakout area near 13,200.

The NDX is up an average of 17% after its one-year high

Technical indicators support the continuation of the bullish trend. Admittedly, the RSI is already in the overbought zone, but it hasn’t generated any bearish divergence yet. On the other hand, the MACD is rising and generating another bar of bullish momentum.

Another argument for the continuation of the bullish trend for the NASDAQ today was made on Twitter by a market analyst @employee. It published a chart showing the index’s historical movements after it hit its first new peak after 52 weeks.

Such a situation has happened 14 times so far in history. On average, this resulted in an increase of about 17% in the following 12 months. Currently, he is appearing for the fifteenth time. If this time is no different, the upward trend is expected to continue.

Stock Market Trend Pattern NDX NDX 52 Weeks Percentage Price Chart
Source: Twitter

Negative correlation with the price of Bitcoin

The long-term correlation between the Nasdaq and the Bitcoin price remains positive. Big tech companies and the cryptocurrency market are following similar trends.

However, from time to time NDX periodically loses its positive correlation with BTC on the daily chart (blue areas). This often happens during a change in the direction of a long-term trend or during a deeper market correction.

Over the past 12 months, the daily correlation between the two charts has only become negative 3 times. The first time was in November-December 2022 when Bitcoin created a macro bottom at $15,495.

At that time, NDX was already chasing the bottom, and it came back and started the accumulation process. Bitcoin didn’t start its rebound until a month later.

The second time it showed a slight negative correlation was in February-March 2023. At that time, Bitcoin price witnessed a correction to $19,500.

Then the Nasdaq index maintained a sideways trend for about a month. After restoring the positive correlation between the charts, both indicators continued their upward trend.

NDX and BTC correlation chart
NDX and BTC Correlation by TradingView

Currently, the third period of negative association has begun in the past 12 months. Bitcoin is consolidating in the $26,000-$28,000 range while the Nasdaq is on the rise.

If the scenario of the previous two periods is repeated, the price of BTC may rise dynamically once the positive correlation is restored.

Moreover, a very bullish sign in the cryptocurrency market would be a possible continuation of the bullish trend for NDX.

If the data from the Nasdaq Historical Movements chart presented above is reliable, the next few months will bring the price of Bitcoin back above $30,000.

For the latest cryptocurrency market analysis from BeInCrypto, click here. click here.

Disclaimer

In line with Trust Project guidelines, this price analysis article is for informational purposes only and should not be considered financial or investment advice. BeInCrypto is committed to accurate and unbiased reporting, but market conditions are subject to change without notice. Always do your own research and consult with a professional before making any financial decisions.

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