Nasdaq's in a Bear Hug It Can't Shake Off

NEW YORK (TheStreet) -- The Nasdaq has been in a Trend Bearish formation since its March 5 closing high of 4357.97, according to my internal algorithm trading process that allows for trading and trend overbought and oversold signals. The Trend signal is a three-month or longer time frame.

It is no coincidence that this is the same time of year that growth momentum stocks such as Facebook (FB) and Netflix (NFLX) hit their yearly highs.

I have been Bearish on the Nasdaq and Russell 2000 indexes since that March 2014 high. Much work needs to be done on the upside before my indicators turn bullish. The Nasdaq is in better condition than the Russell 2000.

The technology momentum stocks of 2013 need to have a huge move to the upside before their bullish trends resume. We can include Google (GOOG), Twitter (TWTR), Yelp (YELP) in that Trend Bearish mode.

What makes this stock market so difficult to navigate in 2014 is the DJIA and S&P 500 being in a Trend Bullish condition, while the Nasdaq and Russell 2000 are in Trend Bearish mode.

It is critical from a trading and investing perspective to have a process that allows for signaling and understanding the difference of being in a Trend Bullish mode vs. a Trend Bearish mode. That will allow for a much better risk management process. Most traders and investors do not have such a process and that is a design flaw.

The Nasdaq is down 6% from its March 2014 highs. There is much work that needs to be done on the upside before the index becomes bullish again. The technology momentum stocks will have their individual bounces to the upside. A trader and investor needs to understand the process of where we are in this cycle.

I will remain very cautious going forward until the signal is given to be more constructive on the Nasdaq. At this point, we will remain bearish on that index. When the consumer discretionary stocks are in Trend Bearish formation and the utility sector is Trend Bullish and the leading sector in the stock market that is not good for growth.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Richard Gobel, owner and operator of Strategic Stock Trades, has more than 30 years of experience in the investment business.

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