Wednesday, February 20, 2013

NASDAQ - Trade Setup

If you read my previous post you would know that I see a short trade setting up in the NASDAQ.  I'd like to continue commenting on other bearish technical factors that are beginning to setup.

In the above weekly chart of the NASDAQ (QLD) you'll notice a "potential" head and shoulders top  that is beginning to take shape. This pattern is far from being confirmed but I wanted to post my observations now rather than after the fact which  would be useless.

There is also a very accurate cycle of 24 week highs which seems to be dominating the price action over the past 2 years. Approximately every 24 weeks (give or take a week) the NASDAQ has put in a significant top. We are 22 weeks from the previous high which is slightly early but close enough to get my attention.

Over the years I've seen similar setups such as this and the endiings have usually not been good for the bulls. The most recent example is the Yen.

Above is a weekly chart of the Yen. Notice the accurate cycle of tops ( down arrows) as well as the head and shoulders top formation.  Look familiar? By the way, the Yen has reached its measured objective.
As always anything can happen and it is quite possible the market may rally from here. I'd be kidding myself if I said the market has to go down. The purpose of this post is to simply show a trade that I see setting up...a road map if you will of what might take place as the pieces of the puzzle come together.  In my opinion I see the NASDAQ as being extremely vulnerable to a downside correction. As always, we'll see what happens.

1 comment:

Anonymous said...

Kevin, I always pause and take a look at the broader market when you post.. You don't post ad nauseum, so I am alerted that something big is happening. Thanks for being there to keep us on the right track.



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