Eichler, tho I haven't given up on the bear case for the Nasdaq, in my opinion the struggle's still on, and an ugly draw (sloppy, broadening trading range, meek rallies and abortive crashes) remains a possibility.
I note with amusement how quickly (took about a week), the conventional wisdom has gone from "re-test of lows" to "buy tech for Summer rally." 7 out of now 9 sessions positive has helped to move the VIX and VXN to extreme lows, and even today's down session did little to halt the slide. Those who fancy themselves contrarians, and who are depending for support upon short interest figures that may have already been out of date the moment they were published, might want to bear these considerations in mind.
On the other hand, however, I do think that, as a good technician, you have to allow for the possibilities that
1) the so-called "h&s neckline" can be drawn in several different ways (i.e., it's not perfect), including some in which it has been broken (or re-broken) "on a closing basis" (and there's no ambiguity on the NDX as opposed to the COMPX);
2) even if the formation is (still) a valid h&s, it has the character more of a "continuation" h&s rather than, say, a bull market top, having already taken much longer to develop than the bulk of the rally which it would otherwise be presumed to be negating -
3) in combination with the upsloping neckline and higher right shoulder, the formation's status as a continuation h&s would be presumed to dampen its inherent force, which would lie more in the remnant strength of the overall bear trend that its "successful" resolution would continue;
3) the pattern of lower highs/lows you describe is indeed part and parcel of the classic h&s + snapback, though the classic typically moves faster and more dramatically, once it's broken down, than this lame example has managed to accomplish to this point.
4) there's no reason to presume that mathematical indicators, both positive (daily DMI, MACD) and negative (overbought oscillators, VIX and VXN) won't also resolve weakly. The tamped down options volatility in particular may simply be reflecting an extraordinarily tame market - less "complacent" than "disengaged."
In short, triskedecaphobical numerology may be the most reliable indicator of all. Unfortunately, I can't tell what it's indicating.
Note: I haven't looked at the COT report lately, but the "commercials" in the same would be short futures contracts, not equities, and would therefore not appear in short interest figures of the type generally being referred to. |
