NDX / QQQ Resumes Downtrend But Approaches Multi-Year Support
Updated
Primary Chart: Several NDX / QQQ Trendlines and Multi-Year Support Zone at $254-$267
SUMMARY:
The bear rally in July and August 2022 had even the bears scratching their heads with their tired paws—"tired" because this year has been anything but an easy ride for bears and bulls alike. In July and August 2022, AAII sentiment even showed some bears took off their furry suit and put on some horns, as the number of bears dropped as price continued to rip higher. But the more steadfast and patient bears were rewarded yet again after the August 16, 2022 peak. In the end, the entire summer's rally was a mirage, a rally that drew in many thinking the worst was finished. This is common in bear markets, with bear rallies in the Nasdaq in 2002 ripping 30-60% higher over weeks, and sometimes months.
But now, the Nasdaq 100
NDX 
QQQ has resumed its downtrend decisively since the August 16, 2022, swing high. Every time a multi-day rally has appeared, sellers have pounced to flood the market with supply, sending the NDX / QQQ back on its downward path.
The next target from a purely technical perspective appears to be the multi-year zone of support near $254/$255 up to $267 on QQQ, which equates to approximately $10,720 to $11,000 on NDX. This is not far below where price traded today. The Nasdaq 100 closed at 11,501.66 / QQQ at $280.07.
This zone of support is also supported by Fibonacci analysis. Fibonacci projections show conservative targets for this leg of the decline around $255.68-$267.53 (Supplementary Chart A), which closely align with the multi-year zone of support (shown on the Primary Chart).
Supplementary Chart A: Fibonacci Analysis with Projections Based on Structure of the Current Decline from August 2022 Highs
Supplementary Chart B: Fibonacci Channel Showing Potential Target Assuming Bear Market Continues into Next Year
The Fibonacci Channel is plotted on a logarithmic chart going back 22 years to 2000 approximately, and the lows in the 2000-2002 bear market. Coincidentally, the $228 price level at the 2.00 line coincides with the longer-term trendline support at about $225-$230 early next year—shown on the Primary Chart as the upward trendline, the lowest trendline on the chart.
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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.
SUMMARY:
- The downtrend has resumed since the consolidation pause in the days leading up to the FOMC presser on September 21, 2022.
- Shorter-term targets include June lows at $269-$270, and if June lows are violated, the next target range is $254-$267 on QQQ, which equates to $10,720 to $11,000 on NDX. This target range is supported by Fibonacci projections as well as a multi-year zone of support, which could lead to an interim (temporary) low.
- Importantly, watch for any undercut of the June 2022 low, and watch for a failed breakout below that level of support—which could lead to another countertrend rally or a period of sideways chop.
The bear rally in July and August 2022 had even the bears scratching their heads with their tired paws—"tired" because this year has been anything but an easy ride for bears and bulls alike. In July and August 2022, AAII sentiment even showed some bears took off their furry suit and put on some horns, as the number of bears dropped as price continued to rip higher. But the more steadfast and patient bears were rewarded yet again after the August 16, 2022 peak. In the end, the entire summer's rally was a mirage, a rally that drew in many thinking the worst was finished. This is common in bear markets, with bear rallies in the Nasdaq in 2002 ripping 30-60% higher over weeks, and sometimes months.
But now, the Nasdaq 100
NDX QQQ has resumed its downtrend decisively since the August 16, 2022, swing high. Every time a multi-day rally has appeared, sellers have pounced to flood the market with supply, sending the NDX / QQQ back on its downward path.The next target from a purely technical perspective appears to be the multi-year zone of support near $254/$255 up to $267 on QQQ, which equates to approximately $10,720 to $11,000 on NDX. This is not far below where price traded today. The Nasdaq 100 closed at 11,501.66 / QQQ at $280.07.
This zone of support is also supported by Fibonacci analysis. Fibonacci projections show conservative targets for this leg of the decline around $255.68-$267.53 (Supplementary Chart A), which closely align with the multi-year zone of support (shown on the Primary Chart).
Supplementary Chart A: Fibonacci Analysis with Projections Based on Structure of the Current Decline from August 2022 Highs
Supplementary Chart B: Fibonacci Channel Showing Potential Target Assuming Bear Market Continues into Next Year
The Fibonacci Channel is plotted on a logarithmic chart going back 22 years to 2000 approximately, and the lows in the 2000-2002 bear market. Coincidentally, the $228 price level at the 2.00 line coincides with the longer-term trendline support at about $225-$230 early next year—shown on the Primary Chart as the upward trendline, the lowest trendline on the chart.
________________________________________
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.
Note
One final supplementary chart: Note
Given that price just fell below a 4-year VWAP yesterday, it seems plausible that a retest of the VWAP could occur (perhaps multiple retests), though price never has to do anything. That 2018-low VWAP is at $282.84 as of September 22, which is only slightly above September 22's close at $280.
Note
If there are any relief bounces next week, the longer-term anchored VWAP (today at $281.90 QQQ) offers a good spot to watch for resistance for the bounce. Note
From a close yesterday at $280 on QQQ, price has fallen to a low of $273.65 today. This was a big move today following many days of selling since the August 16 high. This has approached my first (more conservative) target of $267-$270 by a few points.
The Put/Call ratio is topping 1.38 today—at least the P/Call ratio on TradingView's platform. Sometimes there are different metrics with different options baskets considered for the ratio. The best one to consider would be CBOE's "Equity" Put/Call Ratio. When this hits very high levels, the odds of a *pause* or a *bounce* in a downtrend rises.
The selling continues soon, but the risk of a short-covering bounce is much higher than it was a few days ago. Quite extended to the downside.
Note
US indices are all showing similar long lower shadows below key supports. This could lead to a relief bounce for at least a day or two next week. Combine this with the high P/Call ratio, the negative breadth (down to .10 intraday, which is 1 advancing issue to 10 declining!), and the conditions do seem ripe for a relief bounce. Have a good weekend.Trade closed: target reached
Price reached the conservative target range ("shorter-term targets include June lows at $269-$270") that was mentioned in this article on September 22, 2022. The more aggressive target range has not yet been reached, which lies at $254-267.
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