3SOF

The neckline of the broken one-year H&S Top came in on Friday, July 28, at 1510.78.
The high on the day was 1511.00.
The close on the day was 1510.30.

Given the reasonably good strength of Friday's rally, I doubt that Friday's numbers happen to be a coincidence.  Players know where that neckline resistance is, thus the cap on Friday's rally, right at the neckline.

If the NAZ 100 were to trade perfectly, technically, we would see it do a back flip off that neckline on Monday, and continue down into the autumn, toward the H&S Top target that is IN PLAY.

Unfortunately, the market doesn't always trade in perfect textbook fashion.   

Depending on things like earnings, market sentiment (which has been much too bearish to suit me...bearish sentiment has been at multi-year highs), amount of shorting that has been done that could fuel a rally, etc. the NAZ could break back above the neckline and test other levels of resistance (e.g., the bottom of the last Bear Flag...the blue trendline off the August, 2004 low).

Friday's close is a perfect setup for an immediate failure here on the re-test of the broken neckline.  If the NAZ doesn't fail here, I'd be cautious about having too much exposure to shorts for awhile.  There could be an attempt at a big short squeeze.

Not so sure there is any head and shoulders pattern to be found but is a bit overbought now but good chances we can see a summer rally-- at least much better then it was a week ago.

The 4-year cycle lows are hard to call as  there are usually more then one and no way to know if the first or second will be the lowest one. We may have see the low of the year allready but I think it wil go lower on the secodn try. Maybe it is going to go back in September or October and test the 38% or 50% on the NDX weekly chart. Right now there are quite a lot of nice charts setting up so I put the odds on an August rally first.

We will see what happens when it gets back up to the trend line on the daily chart. That is the most common place for shorts to be waiting.

Quote from: metro on July 29, 2006, 07:24:55 PM
Not so sure there is any head and shoulders pattern to be found

metro,

The neckline of the H&S Top is 1515.42 the week of October 14, 2005 and 1511.53 the week of June 16, 2006.  The Right Shoulder that formed after the June 13, 2006 low, when quite a number of analysts were calling the June 13 low a "capitualation low," was a Bear Flag.

Whether we agree or not that the past year is a H&S Top, in addition to the other downside targets that have MADE since I began posting on this thread the weekend of May 12, 2006, prior to May 15 break of the Double Top in the NAZ 100 (1633-1634) and QQQQ (40.16-40.19), the Right Shoulder/Bear Flag target of 1448.46 also MADE on July 18 on the break of that 1515 - 1511 neckline.  The low was NDX 1446.11.

So up to this point, all of the Bearish targets that we've identified have MADE, and obviously, June 13 wasn't a capitulation low.  In the process of making all of those downside targets, we've also broken below an entire year's worth of trading when we took out 1515-1511.  We're currently at 1510 as of Friday's close, so everything above here is resistance, going back one year.

Quote
but is a bit overbought now but good chances we can see a summer rally-- at least much better then it was a week ago.

Entirely possible.  As I mentioned yesterday, bearish sentiment has been at high levels not seen since the secondary low of March, 2003, and the last 3 weeks in the candlesticks sure look like a Bullish Morning Star pattern (the middle candle is an Inverted Hammer), so we certainly could rally back above the 1515-1511 neckline here.  The fact that all of the downside targets have MADE (except the H&S Top target) also suggests the possibility of rally here.

Quote
We will see what happens when it gets back up to the trend line on the daily chart. That is the most common place for shorts to be waiting.

The bottom of channel off the August, 2004 low (blue line) comes in this week at NDX 1559.85. It rises a couple of points each week (see chart).

The bottom of the Right Shoulder/Bear Flag, at about NDX 1542 this week, also is resistance.

Where the bearish case would start to fall apart, in my view, is if we close back above that channel (blue), and paricularly if we close above the high of the Right Shoulder, NDX 1590.83.  I posted several examples this weekend of Right Shoulders getting taken out to the upside in the SWIR (short) folder on the Stock Picking Board, if you're interested.

Quote from: Melf Elf on July 29, 2006, 01:27:56 PM
The neckline of the broken one-year H&S Top came in on Friday, July 28, at 1510.78.
The high on the day was 1511.00.
The close on the day was 1510.30.

Given the reasonably good strength of Friday's rally, I doubt that Friday's numbers happen to be a coincidence.  Players know where that neckline resistance is, thus the cap on Friday's rally, right at the neckline.

Yesterday's close: 1509.43 on a doji star, right at the neckline again. 

A takeout of yesterday's low 1501.78 will look weak.  Interesting that we've got what looks like a Bullish Morning Star on the weekly chart, but a close today of 1499.18 or lower will be a Bearish Everning Star on the daily chart, coming off neckline resistance.  Naturally, it would need downside follow-thru.

Bull and Bear struggle here at the neckline.

MELF,
I think the QQQQ just broke an bearish Wedge...
what you think....

Quote from: beroznikmal on August 01, 2006, 10:45:46 PM
MELF,
I think the QQQQ just broke an bearish Wedge...
what you think....

b.,

That's difficult to say because you need to start the Bearish Wedge at the secondary low on July 21 to have a Bearish Rising Wedge, as you've done, but if you include all of the trading since the July 18 low, it comes out a Bear Flag, as you also have done.  Nice work!  Applause.

Whichever it is (or both), it isn't looking very pretty, is it?

Quote from: Melf Elf on August 01, 2006, 09:32:52 AM
A takeout of yesterday's low 1501.78 will look weak.

We not only took out 1501.78, we gapped down below it, to 1498.17.
 

Quote
Interesting that we've got what looks like a Bullish Morning Star on the weekly chart, but a close today of 1499.18 or lower will be a Bearish Everning Star on the daily chart, coming off neckline resistance.

We not only closed at 1499.18 or low, the high on the day was the 1498.17 open.



We also closed at 1484.94, below the 1485.96 low of last Thursday's white candle.

Quote from: Melf Elf on July 29, 2006, 01:27:56 PM
If the NAZ 100 were to trade perfectly, technically, we would see it do a back flip off that neckline on Monday, and continue down into the autumn, toward the H&S Top target that is IN PLAY.

We got the back flip off the broken neckline.

Quote
Naturally, it would need downside follow-thru.

The NAZ 100 (and QQQQ) are vulnerable here, below the neckline.  It represents one year's worth of  resistance, and the market is recognizing that at the moment, and backing off from there on the back flip to the downside.

 

I anticipate, with everything that is going on, we will have another leg down....
B

The way the stock market is trading kind of reminds me of that one stock you have a position in that will go slightly your way then unexpectantly go the other way... just when you about to give up it goes your way big time. I continue to hold all short positions through this rally because I think the BIG DROP is coming at some point in the near future. DOW up 100 points... on what though? Many people think there is manipulation going on by people like the "Plunge Protection Team" this has been a hot topic on the boards and even some respected people in the stock market believe this can be the case. Well for those that havent shorted maybe its a good time to take position when the DOW is over 11200... If the FED decides to raise interest rates again which I believe they will it will kill the markets in the short term.

Quote from: nullzero on August 02, 2006, 12:08:05 PM
The way the stock market is trading kind of reminds me of that one stock you have a position in that will go slightly your way then unexpectantly go the other way... just when you about to give up it goes your way big time.

nullz,

Yeah, that's the nature of these Flags and Wedges, and we've had several of them since the May 11 break of the Bull Flag that wasn't bullish.   

Down..Up...Down...Up...Down....

Since the May 11 break, we know that all of the patterns ahve resolved to the downside, and that all 4 of the targets have MADE  (the H&S target still is IN PLAY as long as we're below the neckline.  It goes ON HOLD above it).

After the back flip off the 1515-1511 neckline on Tuesday, the market came right back there yesterday. The high on the day was 1510.51, smack on the trendline again, where the market backed off, for a close of 1500.48.

Still a Bull and Bear struggle at the neckline.

Interestingly, the bottom of Beroznikmal's Bearish Rising Wedge came in yesterday at 1501.58.  We got through it for another re-test of the neckline, but that's still resistance.  We backed off and closed slightly below B's Bearish Rising Wedge, at 1500.48. 

As the chart stands, that close gives some validation to B's Bearish Rising Wedge pattern.  It needs downside follow-thru, of course.

Notice that on all of the following pattern breaks, the market tried to regain the pattern, like yesterday, but failed:

1. The break of 1634-1633 support on May 15.

2. The break of Bear Flag #1 on June 6.

3. The break of Bear Flag #2 on July 10.

On each of those breaks, the market got slightly back inside the pattern, then tanked to the pattern targets, all of which MADE.

Notice also that Bear Flag #2 took awhile to form, and that it went back above the channel (blue line)...below the channel...above it...then below it, broke the Bear Flag, and the 1448.46 target MADE on a dead drop from the June 30 high (post-Fed rally) to the July 18 low.

This could take awhile. 

If the Bulls can take out the 1515-1511 neckline, we likely will see metro's rally, and likely to the bottom of Bear Flag #2 (roughly NDX 1542) or the broken channel (blue) at NDX 1559.85 this week.

Possibly higher.  We'll try to follow it as best we can.

Once again the Nasdaq rallied up to break the neckline but closed under the neckline. IMO, the bearish wedge/flag is still in play. Monday should be interesting, the market is telling me it is in Bearish mod which tells me that the feds will most likely continue to rise the interest rates come teusday which will cause the overall market TANK...

AGAIN just my opinion...
B

Quote from: beroznikmal on August 03, 2006, 09:27:11 PM
Once again the Nasdaq rallied up to break the neckline but closed under the neckline.

B.,

Yeah, it's still a Bull and Bear battle. 

Quote
IMO, the bearish wedge/flag is still in play.

Yes, the close was just inside your Bearish Rising Wedge (not shown on this chart), right at the neckline again.  On this chart, I've drawn it as a Bear Flag (purple) because the bottom of the flag came in yesterday at 1483.44, and yesterday's low was 1484.60.

I've also added a down trendline (black) off the May 8 high, right before the market tanked.  There are only two data points on that trendline (May 8 and July 5), but yesterday's high was dead on it, then the market backed off a little to the neckline close. 

Quote
Monday should be interesting, the market is telling me it is in Bearish mod which tells me that the feds will most likely continue to rise the interest rates come teusday which will cause the overall market TANK...

AGAIN just my opinion...
B

I'm leaning slightly toward metro's summer rally, mainly because of the high Bearish Sentiment numbers.  "Expect the Unexpected." 

But, I'm also mindful that in a Bear Market, it is correct to be bearish, so any rally here could simply be a "relief rally," to work off bearish excess.

High bearish sentiment doesn't necessarily mean that The Bears have got it wrong.  Extreme bearish sentiment only is wrong at bottoms.  It doesn't seem likely that we bottomed at 1446 after completing a one-year top, but I'm open to the possibilty that the break was a Bear Trap.

I don't think that it was a Bear Trap, but we'll have to see, and try to play it accordingly.

Everything above the 1515-1511 neckline is one-year resistance, so even if we close above the neckline, it might be a raggedy rally, trying to chew through resistance:

1. The top of the Bear Flag comes in today at 1527.83.

2. The bottom of the last Bear Flag comes in at about 1544.

3. The bottom of the broken channel (blue) comes in at 1559.85

4. Kumo (Cloud) resistance begins at 1559.05, right at the bottom of the channel (see next post).

5. The high of the last Bear Flag is 1590.83.

Both the channel off the August, 2004 low and the bottom of the Kumo (Cloud) are currently at 1559.

Quote from: Melf Elf on August 04, 2006, 07:29:42 AM
Everything above the 1515-1511 neckline is one-year resistance, so even if we close above the neckline, it might be a raggedy rally, trying to chew through resistance:

1. The top of the Bear Flag comes in today at 1527.83.

We gapped up above the neckline, and above the black down trendline, got to 1530.04, two points above the Bearish Rising Wedge/Bear Flag, then they let the air out if it, and we closed back below the 1515-1511 neckline, at 1503.84.

Pretty raggedy attempt to the chew through resistance.

There are a number of ways to draw the trendlines in this Bearish Rising Wedge pattern (I'll go with that, since the trendlines eventually will converge).  The important thing is how the market responds to the trendlines.

After we connect the first two highs and lows (the first low actually was a "secondary low") and extend them out,  how did the market respond?

1. Thursday's low was about one point from the lower trendline, then the market rallied.

2. Friday's high was about two points from the upper trendline, then the market sold off.

3. Friday's low was about three points from the lower trendline, the the market rallied again.

For an index at 1500, a couple/three points from a trendline is pretty decent indication that the market is reponding to/validating those trendlines.

We could see more of this up and down, like we did in the last Bear Flag.  If we take out the bottom of the pattern, that would put 1446-1450 IN PLAY, and also would put (roughly) 1410 IN PLAY, as long as we remained below the broken Bearish Rising Wedge. 

On any break, re-tests of the bottom of the broken pattern should be expected.

On the upside, this Bearish Rising Wedge could "morph" (change) into a Bear Flag as the market tries to chew through some more resistance.  The upper trendline would need to be redrawn, and would be more parallel to the lower rail, looking more like a flag.

The top of this curremt pattern (purple) and the bottom of the last Bear Flag are next resistance.

We can see why the market has been difficult to play from both the short and the long side.  Up.  Down.  Up.  Down.  Good for quick trades, though.

Basis the weekly chart, we finished the week of July 28 on a Bullish Morning Star.  That chart next.

Doji Star this week, just below the broken neckline.  Indecision.

Open: 1506
Close: 1503

Upper Wick: 24 Points
Lower Wick: 27 Points

Could we be any more indecisive? 

A black candle the coming week that is at least half way below the July 28 white candle would look like a reversal of the Bullish Morning Star into a Bearish Evening Star, right at the broken neckline of the one-year H&S Top.