NAS/QQQ Weekend Look (Jan 24-28)
Here a look the NAS/QQQ going into the week of Jan 24-28. Last week began above the key 14152 pivot and above the bottom of the neutral zone. The 14152 level was broken on Sunday night and by the close Tuesday price was below 14152 and the neutral zone. This move confirmed a double top on the daily chart and led to 3 successive down days finishing the week at the Oct low.
With the close below the longer term neutral my bias has turned from neutral to bearish and the path of least resistance is down. First support this week is the key pivot of 14367. Expect minor support at the green box defined by the 1.13/1.272 fib inversion. This will be the last line of defense for a false breakdown. If that level fails to hold a move down to the 13300 is expected.
I have posted this week's chart on the weekly time frame. This chart shows the divergence of price from the longer term trend. Odds now favour a return to the top of the prior channel at the 13300 level. Now that stimulus from Covid is being removed a reversion to the prior trend makes sense and the current market sentiment is confirming this with the corrective price action. Market participants are re pricing everything to pre-covid metrics.
The challenge with this thesis is that price is not likely to move in a straight line and a corrective bounce is possible before a move lower. Also, this week is very important for the market. We have the Fed rate announcement and many mega cap names will report earnings. Expect volatile price action going into the rate announcement. A short covering rally into the red box is possible early in the week. What will happen after the rate announcement can not be predicted. At this point I am expecting a lower low but the fed may surprise us so following what price actually does is paramount. The easiest plan this week is to simply spectate. If you are not a skilled scalper I would recommend sitting out until the future trend is clear as the price action is likely to be very choppy and hard to trade. I will do my best to provide updates a things play out.
Weekly events....
Monday... Earnings HAL, IMB
Tuesday... Earnings MSFT, JNJ, LMT, MMM, TXN
Wednesday... FOMC rate decision & Powells press conference!!! Earnings... BA, T, ABT, TSLA, INTC, NOW
Thursday... Jobless claims, Durable goods Earnings... MA, NUE, MCD, LUV, AAPL
Friday... Consumer spending & Univ. Mich Sentiment Earnings.. CAT, CVX, CL
Bullish Notes.
Potential short covering rally into key earnings and FOMC
Technically oversold
Fed may surprise the market with dovish commentary
Bearish Notes...
Confirmed double top and trend break
Rate decision worries
Potentially disappointing mega cap earnings
Taper tantrum accelerates
10 year yield breaks 2%
Broad selling in ETFs by index investors.
Panic
No reason to buy if lower prices are expected
Comment:
Massive sell off overnight and continuing into the regular session. The 1.13/1.227 support zone is struggling to hold. Really need to see the 13800 area hold if we hope to see a relief rally. Next level down is about 600 points away.
Comment:
Ended up holding the 13800 level posted above and going on to rally 700 = point to close out the day green. I was expecting some sort of short covering rally but this was and exceptional move. I have re drawn the red resistance box with a new measurement from today's low. The bulls are not out of trouble yet. If you go back to Jan 10th you will see a similar candle and the market sold off afterward. The trend is still down until price can get above the red box. The NAS likes to re test lows before going higher so today's low is the new key level to watch.
Comment:
Chopping around wildly near the 14367 level waiting for the Fed meeting tomorrow. Above 14367 leans bullish below bearish.
Comment:
Here is how NQ closed out the week on the lower time frame. Continued the chopping price action within the box, but notable that the green box held after 4 tests of the lower range and price closed back above 14367. Positive for the bulls b/c price had every chance to sell off deeper but didn't.
Comment:
Here is the higher time frame view. Notice price dropped down through the 1.13/1.272 fib inversion zone and popped right back up. So for now the breakdown has failed. Needs to confirm with higher highs next week.
