Its probably obvious too all, but thought I would point out that the Nasdaq can fall much lower with or without a 'valid' head and shoulders pattern being in place.
Both the COMPX and NDX are hovering just above the lows of 2000, and at this time a lower swing low - 11/13 -- for the entire year is still in play. With such a situation in place, I suggest that while risks are present for either side of a trade, the situation is not long friendly.
I see many posts all over SI talking about *valuations*, *deeply oversold* and such, but its my opinion that these concepts are being redefined on a daily basis and offer traders little guidance in this seemingly new market.
Of greatest risk is that there are few guideposts for support below where the market currently resides. The first meaningful support for the NDX (after the 2742 low of 11/13)resides near 2550, over 500 points away.
The COMPX, somewhat weaker, has support at 2890 and the 11/13 spike crossed that level at 2859. Traders will continue to watch these levels and are likely to take decisive action if they are touched repeatedly (a weakening scenario) or pierced.
In the short term, we see on the chart a declining wedge pattern that is forming. A very long chart follows, if you run your monitor at 1600 * 1200 it will fit ;)
intelligentspeculator.com
The diabolical scenario would be a short-covering / long-fear-of-missing-the-train induced rally to one or more of the targets, and then the rug being pulled out by a lack of buyers and return of sellers due to some market or other news event. Between preannouncements, eco news, the election and things not yet considered, there are probably enough catalysts.
Should the market manage to rally in the face of much bad news, then perhaps we will be looking at a bottom worth buying.
But its a day by day market, and since there is a lower swing high and low still in place, the downtrend has to be presumed to be intact until proven otherwise.
cheers
mw |
