Nasdaq bull / bear cyclesNasdaq has seen some tremendous opportunities the past few months for swing traders. I want to put aside all the narrative and sentiment and focus only on the chart cycles I am seeing. Within a descending wedge formation we started to see a 3 week or so bull cycle to resistance of channel, followed by a slightly shorter bear run to support of forming channel.
This has expanded and contracted slightly through the move. Now we are at a tighter fortnight cycle of bull / bear momentum. Note how the formation was broken during October lows. And then once more recently hitting strong resistance from October highs, forming a clear double top formation.
The breakdown for me invalidated the pattern, which is why I was aiming for a short entry around or just above the arching resistance that had formed. I had some intraday scalps with very short term positioning which proved lucrative, but I could see from the expanding bond market that the move would run to or above the previous channel resistance. I entered short a little early average at 15108. I held through the spike thereafter with confidence that the bond market would pivot and continue down to new lows. By my estimates 2007 lows should be re-visited before any meaningful extended bull run is seen.
The 30yr bond auction went very poorly yesterday, and as a result bonds fell sharply, the move back up today was only retracement in my opinion. With the drop being an impulse wave, where, once retracement is over (I believe it is now over), we should see the wick filled and a continuation of the move down to new lows.
I am of the view that time in the market is more important than patterns and price action. Of course support and resistance should be strictly followed, with every attempt to only short at resistance and only buy at support. With this in mind my TP 1 for this trade will sit near October lows 14058 - 14100. If current cycles are followed this should happen 22nd-24th November. When this target is reached if we see a meaningful bounce on this and bond markets, then it could signal a triple bottom on nasdaq and bullish momentum could carry it back to around or just over 15k the following fortnight. Otherwise it could continue down to previous May breakout and gap fill down to 13965.
Of course, it all depends on other economic sentiment and events, I think its quite safe to say the fed will raise rates again in December by another 25bps following Powell's hawkish comments and recent consumer sentiment miss. Inflation is still not under control, and a pause will not bring it under control anytime soon.
I could still see the fortnight bull/bear cycle continue regardless of interest rates, the way the market structure has become in recent years a big crash in a short time looks unlikely. However, a black swan event such as an escalation of tensions in the Middle East could of course capitulate an already vulnerable market. Having said that, we should never trade on hope or fear, and we should always be vigilant and steadfast in our strategy, taking profits when it hits targets, or indeed exiting the trade early if there are clear signs that the strategy will not play out as expected.
If in fact the market continues up beyond 15380 I will be looking to close in loss. As you will see from my bias I do not think this will happen. I will also look to taper my position when in profit if there are any signs that the continuation of the bearish trend will not play out.
As always DYOR.
I am not a financial expert, and this is not financial advice. Only risk what you can afford to lose, don't get greedy. And don't let losing trades run you down.
Stay safe and spread love not hate.
