If yesterday's candle top holds, we'll have a falling resistance line dropping 14-points a day until the downtrend is broken.
That's overly simplistic, but it could indicate a ceiling of 1840 by the end of the week, but that would turn into support if it was breached to the upside after a drop below.
For major support, I believe we have to look to the falling resistance line originating from the January 2001 high to the May 22 high. That line served as the upper barrier for the spring rally, and it may serve as support for this fall rally. Currently the line intersects an area around 1700, but it should drop to around 1600 early by mid-December.
Larry's channel is the other major line of support, and that is around 1760 by the end of the week.
An indicator that gets some more conservative traders in the market is when the 10-day SMA crosses above the 50-day SMA. That happened at the end of October around 1700 COMPX.
Interestingly, the 10-day crossed below the 50-day in mid June at around COMPX 2100, triggering a sell for these same folks. If you followed that fundamental, you'd be doing pretty decent.
Actually, anyone using that tactic would have sold out at COMPX 4600, bought at about 3650, sold at about 3850, made another trade for about even, lost very little in January, made another trade in the spring for about even, and made money since COMPX 1700 this fall.
Basically that tactic would have locked in most of the bubble, but not made much on the bear rallies we've had this year. For a pretty basic indicator, it works nicely as a stop-loss on long term holdings.
I believe in the face of what appears to be distribution, volume becomes an important component. If we continue to see lower volume, it should be followed by lower prices. A big volume day could indicate a reversal of the trend.
Another level of support could be the 50-day SMA. That is close to 1700 right now.
To sum up, if we drop below 1700 for more than a day or two, I believe Zeev's scenario 1 is in play. If we drop below for only a day or two, scenario 2 could be in play.
The lower Bollinger Band is also converging on 1700, providing support there.
Also note that a .382 re-trace of the run from 1387-1922 is about 1717, which could also serve as support.
Last January the falling resistance line from the September 2000 high was breached to the upside for several days to the tune of 100-150 Nasdaq points. This is similar to what we've seen the past several days, and we all know what happened after that high in January.
Another thing is that there is a falling support/resistance line from the April & May 2000 lows that served as support last January and also seems to intersect with Zeev's target of 1458 in December. This same line also would have served as support in Zeev's scenario 1 in his previous low for September/October of 1600 plus or minus 20.
Bottom line: I think we have a real battle on our hands near COMPX 1700. It is a level that will provide support from several indicators. Furthermore, what we're seeing right now is very similar to the January and Spring rallies.
The picture should get a bit clearer as the end of the week approaches. We may get a sharp drop of 100-points or so to support at 1793 and turn up again towards 1840 by the end of the week. The 60-minute indicators are turning up, but could turn back down again tomorrow. They do appear to be pointing towards a low earlier in the week if there is one.
Anyway, from looking at things right now, I don't really know what is going to happen. All I can say is that we should correct a bit early this week, and there may be a looming battle between bulls and bears a bit above COMPX 1700 in late November / early December. |
