The ADX on the NDX daily is has been dragging along at very low levels since the end of December:
stockcharts.com[h,a]daclyyay[df][pb20!b50!b200!c13!c20!c50!i!d20,2!f][vc60][iUb14!La12,26,9!Lg!Li10,10!Lh5,5!Lp14,3,3!Ll14][J6471081,Y]&pref=G
Each time the ADX has reached this area, a swift decline has ensued. July 18, 2000, the COMP hit 4238, then dropped to 3521 by August 3, a drop of 17% in 12-trading sessions.
February 1, 2001 is another example when the COMP was 2650, but the ADX kind of dropped quickly to that low level, so that's probably not as applicable here, but we did drop about 40% from that reading.
Around the June 7, 2001 high of 2264 we had another low ADX reading, and we dropped from there to 1973 COMP in 9-sessions, a drop of 13%.
The August 3 COMP high of 2103 was at another very low ADX level, which did not bottom until another lower high was hit a few days later. The COMP dropped 34% in 6-weeks after that reading.
The other example that correlates closely is Jan. 18, 2002.
The COMP hit 1964 that day, down from the Jan high of 2098
Jan 9 7-sessions earlier, but it still dropped 14% over the next month.
It's interesting that the levels the ADX lows are also are near future post low highs after the coming drops. This might be a clue as to what to expect here, although the sample size is pretty small to make much of a determination.
The weekly chart doesn't give much of a hint here, but the current position relative to the ADX and Stochastic levels could be compared with late October 2000, when the COMP had risen to 3526 for options expiration after having dropped to 3054 7-sessions earlier. After that ramp to 3526, we dropped to 2200 in 2-1/2 months in an agonizing drop.
The ADX and stochs on the monthly COMP charts look similar to October 2000 and March-April 2002:
stockcharts.com[h,a]waclyyay[df][pb20!b50!b200!c13!c20!c50!i!d20,2!f][vc60][iUb14!La12,26,9!Lg!Li10,10!Lh5,5!Lp14,3,3!Ll14]&pref=G
It appears we may be setting up for a big drop of at least 13% and possibly more. If it is going to be more, it will have to happen over a longer period of time.
Looking at Bradley turns on March 13, April 2, April 12, and July 2 as well as options expiration, it may make sense to anticipate the following:
A drop to NDX 975 or so by tomorrow AM
A rise to NDX 1035 or so by Wednesday or early Thursday
A drop to NDX 940-950 by March 12
A rise to NDX 1017 by March 18
A drop to NDX 864 by April 4
A rise to NDX 973 or so by April 15
A drop into July 2 to NDX 675-690.
This is just one scenario I'm looking at. Whatever happens in the end of March / early April will be the clue as to what we should look for further on down the road. |
