Market Overview

Crayon Analysis for QQQ

Share:
Crayon Analysis for QQQ

Here is a 'crayon' analysis of the Nasdaq (NASDAQ: QQQ). This is obviously not refined technical analysis; hardcore analysts would not consider it. But keeping it simple usually offers a clear picture of scenarios. Not to say that the analysis is a certain predictor of the future, but it is one possible scenario based on past performance. Make sure to also look at the 20 year chart below to compare it to the bubble era.

  Looking at the chart (second below) reveals that every peak has a mirror valley (some with a break in time in between). The peak that brought the index to 75 now has half a valley. The question is: will it complete the second half? Also, look at how eerily similar the two highlighted sections in this smaller chart are. They are too similar to ignore, with one long leg up then five zig zags down (see chart below).

chart1: (the green X marks the 'we are here' spot. Tomorrow it could decide to break down or break the habit and find footing. Today's candle showed extreme indecision. Often, the next day is big (direction unknown).

738685afdcdcc3cf0e18880cdacce295

Chart2: incomplete path or just a coincidence?

2a8a99daf146a5c986f3f63b8c422ff5

The 20 year chart below shows that the index is in bubble territory. But the angles at which it climbed to reach the bubble are nothing alike. The dot-com bubble was almost 90 degrees where as this one is less than half of that. What does that mean? It seems that the Nasdaq will not crash, but we may have some bearish trading days ahead. The bulls need a light at the end of the tunnel and they will take the reins again. Something like the end of the sequester or a budget grand bargain could bring back the bullish momentum.

284012ec1f20780b5b9f8540171167bd

Posted in: Markets Trading Ideas