NDX / QQQ: Broader Picture for Nasdaq 100 in Six ChartsPrimary Chart: Potential for Symmetrical Pattern in Two Major Segments of Decline Shown by Roughly Parallel Price Paths in Orange
Many recent posts have contained a great deal of written analysis and explanation. This post is intended to be a chart-heavy weekend update on the NDX as reflected by its well-known ETF ( NASDAQ:QQQ ). This post will be far more concise and contain mostly charts and brief descriptions.
Supplementary Chart A. The two month downward trendline from the mid-August 2022 peaks has been broken, a shift in shorter-term trend degree. Bears don't need to be told that something has shifted in the short-term. Like other squeezes this year, this one probably hurts. But note the yellow Anchored VWAP from 2018 lows, currently at $282.45—price looks like it will confront this level this week. Price will also confront a longer-term Fibonacci level at $286. These levels could be a spot where price could stall and consolidate a bit, perhaps into the FOMC presser on November 2, 2022.
Supplementary Chart B.The weekly chart of the Nasdaq 100 shows the downward trendline very much intact throughout this entire bear market. Note the long-term VWAPs have now begun to slope downward. The long-term VWAPs are anchored to the Covid 2020 low and the December 2018 low. Price will confront the 2018 VWAP again in the coming days. The first test of that VWAP was repelled this past week after FAANG earnings largely missed (except for AAPL). The Covid 2020 VWAP approximately coincides with the down trendline from the all-time high.
Supplementary Chart C. The next chart zooms in a bit on the December 2018 VWAP. This VWAP aligns quite well with the .382 retracement of the major decline from August 16 to October 13, 2022. This area of confluence is $282.32, and price may consolidate or whipsaw around this level before continuing in whatever direction it chooses after FOMC, though the rally appears as if it may have a bit more steam. Unless the Fed presser completely squishes the rally (a distinct possibility), a reasonable target is the .50 retracement at $291.60, but only if this .382 level and 2018 VWAP at $282 can be relcaimed.
Supplementary Chart D. A derivative of the Bollinger Bands, the %B indicator distinctly shows a W-bottom pattern. As price made lower lows in October 2022, the relative lows were higher than September 2022 lows (relative means in terms of standard deviation from a mean).
Supplementary Chart E. Weekly RSI shows a major positive divergence (also known as a bullish divergence). This has not yet been conrfirmed. Sometimes, weekly divergences can take quite a will to take effect—notice that the weekly negative divergences—starting with the RSI peak in late 2019) took about 2 years to result in a major bear market. In other words, even though there were negative divergences on weekly RSI, higher highs continued in the index until late 2021 where the final negative divergence was formed. This means don't front run a weekly RSI negative divergence, but keep it in mind, especially when they begin to add up.
Analysis and Discussion. Short-term trends have clearly shifted, but longer-term downtrends remain intact with the bearish structure unaffected by the short-term noise. But as stated in my recent SPY analysis, don't fight the rally. Rallies are an inevitable part of downtrends, which by definition include lower *highs* and lower lows. There are reasons for a multi-week rally, though it won't be in a straight line. Plenty of resistance lies overhead, however. And the longer-term downtrend remains intact on logarithmic and linear charts. Maybe the Nasdaq 100 makes new lows next year in the first half of 2023.
One possibility, however, is that the two major segments of this decline are roughly parallel. See the orange price paths on the Primary Chart, the first one of which follows price, and the second one of which follows price and then projects the hypothetical path that would be parallel to the first path.
________________________________________
Author's Comment: Thank you for reviewing this post and considering its charts and analysis. The author welcomes comments, discussion and debate (respectfully presented) in the comment section. Shared charts are especially helpful to support any opposing or alternative view. This article is intended to present an unbiased, technical view of the security or tradable risk asset discussed.
Please note further that this technical-analysis viewpoint is short-term in nature. This is not a trade recommendation but a technical-analysis overview and commentary with levels to watch for the near term. This technical-analysis viewpoint could change at a moment's notice should price move beyond a level of invalidation. Further, proper risk-management techniques are vital to trading success. And countertrend or mean-reversion trading, e.g., trading a rally in a bear market, is lower probability and is tricky and challenging even for the most experienced traders.
DISCLAIMER: This post contains commentary published solely for educational and informational purposes. This post's content (and any content available through links in this post) and its views do not constitute financial advice or an investment or trading recommendation, and they do not account for readers' personal financial circumstances, or their investing or trading objectives, time frame, and risk tolerance. Readers should perform their own due diligence, and consult a qualified financial adviser or other investment / financial professional before entering any trade, investment or other transaction.