Larry, there is a symetrical triangle on the Nasdaq formed by the rising support line off the Sept. bottom and the falling resistance line off the May and June highs.
This is converging right about the time of the FOMC meeting. If you are a believer in a new bull run, you must believe this will break to the upside. However, I believe it will break to the downside violently after a 25BP drop in rates and a neutral bias. Zeev's 1628 does seem like a decent initial target. (I believe the 25BP will happen instead of 50BP because of the fairly recent 100BP cut and the disparity now between European rates and US rates. It will also leave 25BP for the future).
We are above Max Pain right now, and options expiration is just 10-days after the FOMC. There is usually a pretty good counter move after the meeting for 3-days, and that would get us below Max Pain, allowing a bounce and some shaking before Nov. 16. Maybe we get near 1628, bounce to 1706, and drop to around 1680 for expiration and drop further the week after expiration.
I believe Zeev's upper price targets recently are the result of the falling resistance lines intersecting his cycle highs. That falling line also coincides with the heavily anticipated double bottom in December.
As for the bullish charts you're seeing, you must remember we did have a couple of head-fake moves above the FRL in the summer drop off the May highs.
I flipped everything to the dark side yesterday after riding some QQQ Nov. 36 calls this week. I'm in USPIX, BEARX, and have QQQ Nov. 35 puts purchased at 1.30 (my internet access was too slow to get 1.20 when the opportunity presented itself). If we break above the FRL, I can flip everything pretty easily. For now, there is very little that tells me I'm on the wrong side of the market right now.
Anyway, that's what I'm thinking right now and that's how I'm playing. I have no way of knowing if any of this will happen accordingly, but part of the fun of investing in the market is applying what we've learned and enjoying the results when we profit from it. |
